Indian markets are likely to see a cautious approach from investors as the possibility of another rate hike by the RBI will be looked into in the upcoming meeting on November 3. On the global front, the European Central Bank (ECB) has already increased rates by 75 bps, while the prospect of a fourth aggressive 75 bps hike by the US Federal Reserve during November’s policy is on the cards. RBI is expected to continue raising rates as inflation hit a 5-month high of 7.41% in September. Additionally, global markets as well as Q2 results, macroeconomic data and foreign fund inflows will play a role in influencing the sentiments of domestic equities. Last week, both the Sensex and Nifty 50 had gained about 1 per cent. The Sensex is currently a little shy of the 60,000 level and the Nifty 50 is just a few points away from crossing the 17,900 level.
Last week on Friday, the Sensex closed at 59,959.85, up 203.01 points or 0.34%. While the Nifty 50 closed at 17,786.80, up 49.85 points or 0.28%. Rise in heavyweight stocks kept the performance on the positive front maruti suzuki And strong buying is being seen in RIL. Auto stocks outperformed peers ahead of key Q2 results and monthly sales data. While oil and gas, consumer durables and energy stocks also contributed to the rally.
Meanwhile, foreign investors emerged as net buyers during the week between October 24 and October 28. FII inflow into equities 3,986.25 crore during the week.
On the other hand, on Interbank Forex MarketThe rupee on Friday closed broadly flat at 82.47 against the US dollar. The local unit, however, posted a weekly increase from December policy on expectations of a reduction in the size of rate hikes from the US Federal Reserve.
On the weekly performance from October 24-28, Vinod Nair, Head of Research, Geojit Financial Services, said, “Domestic markets remained flat during the week with a positive bias as favorable domestic cues were countered by mixed global mood. US GDP growth up 2.6% during the quarter ended September. However, it failed to lift the market as US tech stocks saw a significant sell-off following disappointing quarterly results and a bleak forecast. The ECB raised interest rates by 75 basis points. , also indicated that it is making progress in combating record inflation, although the prospects of a slowdown have increased. Global markets were relaxed. As a result, bond yields softened worldwide, with the US 10yr yield diving below 4%.”
What to expect in the markets during the week from October 31 to November 4.
RBI last week announced an additional meeting of the MPC scheduled for November 3, 2022.
Dr Joseph Thomas, Head of Research, Emkay Wealth Management, said: “A 75 bps hike in the base rate by the ECB and a rate hike by the hawkish Fed at the FOMC meeting, which is due next week, is expected, and encouraging US GDP numbers are such. There are factors which could turn out to be important for the markets in the coming week. The special additional meeting of the MPC convened by RBI for November 3, 2002, and the possibility of further hike in rates in view of persistent inflation are some of the factors on which the markets may consider this. Timing is taking a careful look. We may see some volatility in the markets as we approach the new week.”
It needs to be noted that the RBI has already hiked the repo rate by 190 basis points for the last four consecutive policies – the rate currently stands at 5.9%. The reason behind the increase is to contain inflation which is at a many-year high. India’s CPI inflation has been consistently above the RBI’s upper tolerance limit for the past nine months. Inflationary pressures have taken a toll on the prospects for global economic growth. Most experts have asked the RBI to continue the rate hike trend at least till the end of December 2022.
Whereas, Shrikant Chauhan, Head of Equity Research (Retail), Kotak Securities said, “Global conditions remain challenging. Over the next few weeks, Indian markets will focus on domestic macro data and quarterly results and management commentary will drive the stock- specific action.”
In Nair’s view, depreciation in treasury yields, coupled with a strengthening rupee and good Q2 earnings results, will support the domestic market in the near term.
According to Mitul Shah, Head of Research, Reliance Securities, the market fears that a further rate hike by the US Fed may strengthen the US Treasury yield again, which could further weaken the rupee. The 2QFY23 earnings season saw decent revenue growth so far, but higher inflationary pressures took a toll on profitability. Inflation has remained stable in both the domestic and US economy. India’s growth remains strong and is expected to be one of the fastest growing economies in the world, while the global slowdown and growth slowdown continued for the major economies. The market is looking forward to the monetary policy meeting of the US Fed to be held on November 2. Comments will be focused on festive demand, inflation outlook and rate hike in the near future.
Disclaimer: The views and recommendations given above are those of individual analysts or broking companies and not of Mint.
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