US FOMC minutes, inflation data among 6 key factors that may guide markets this week

Domestic equity markets ended the week with gains following favourable cues at both global and domestic front. Easing inflationary worries, returning FPIs and strong rupee supported the indices on Dalal Street.

Benchmark Indices, BSE Sensex and Nifty50, advanced up to 2 per cent each during the week, whereas indices gauged to second rung stocks - midcap and smallcap - also settled a per cent higher each.

Among the sectoral pack, banking, financials, metal and energy witnessed strong traction while defensives including pharma, FMCG and IT were slightly on the back foot.

The easing of aggressive rate hike worries the US Fed and inflow of foreign funds boosted sentiment. The tone was positive for most of the week but profit taking in the second half capped the upside, said Ajit Mishra, VP-Research, Religare Broking.

"In the coming week participants will first react to the macroeconomic data viz. IIP and CPI in early trade on Tuesday. Going ahead, with the earnings season in its last leg, the performance of global markets will be the focus for cues," he added.

The result season for June 2022 quarter is over and India Inc posted a mixed performance. The coming week is also a truncated one as the markets will remain shut on Monday on the account of Indian Independence Day.

Below are the six key factors that may guide markets this week:

US FOMC minutes of meeting
The US Federal Open Market Committee will release its minutes of meeting in the coming week on Wednesday and global markets will keep a close eye on it for guidance over inflation and recession. The market will also attempt to interpret the timeline for future rate hikes.

Inflation numbers
Indian markets not only react to retail inflation, which eased to a 5-month low of 6.71 per cent in July, but will also track the wholesale price index or the wholesale inflation numbers, which will be released in the upcoming week.

CPI headline inflation for July has moderated inline with our expectations led largely by food inflation while the core inflation remains elevated and sticky, said Upasna Bhardwaj, Chief Economist, Kotak Mahindra Bank, commenting on CPI numbers.

FII flows
After an intense selling for nine months, the foreign portfolio and institutional investors have turned buyers in August. FIIs sold a record Rs.4.38 lakh crore worth of Indian stocks in the past 16 months till July 2022 the data suggests but analysts expect trends to reverse for at least sometime.

According to the data from NSDL, FPIs have bought shares worth more than Rs 18,800 crore till August 12 on the back of weakening dollar and rising rupee.

India is a preferred destination since India has the best growth prospects among large economies of the world. FPIs have turned buyers in autos, capital goods, FMCG and telecom. They continued to sell in IT, said VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services.

Rupee movement
The movement of rupee against the US dollar is likely to impact the inflows from the foreign investors, particularly during the week when India announces its balance of trade and trade deficit numbers.

The rupee ended lower on Friday and down on week as likely one-time dollar outflows dragged the currency compared to stronger Asian peers that gained from softening US inflation data.

Crude oil prices
The crude prices have eased down substantially in the international markets, which went soaring in the wake of the Russia and Ukraine war, particularly in the last couple of months as Brent oil futures are below $100 per barrel, whereas US WTI futures are hovering near $90 a barrel.

Traders will be keenly looking at recession buzz leading to retreating demand and Russian resilience for the future movement. When economies slow, the demand for energy naturally drops.

We expect crude oil prices to trade sideways to up with resistance at $98 per barrel with support at $92 per barrel, said Tapan Patel, Senior Analyst (Commodities), HDFC Securities.

Technical outlook
The Nifty gained ground in all four trading sessions last week ending higher for four weeks in a row. The bulls are benefiting from strong medium-term momentum, said Apurva Sheth, Head of Market Perspectives, Samco Securities.

"The hourly RSI has tumbled behind the price and is displaying a bearish deviation which indicates that upward momentum may be going to slow in the short term," he added. "Short-term traders must liquidate some positions and wait for dips to enter."

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)