RBI MPC meeting, macro data among 8 factors that will drive markets this week

Equity markets gyrated between gains and losses but they staged a smart recovery towards the end of the week. Sustained volatility and massive sell-off in Adani stocks kept investors on the edge despite a well balanced Budget.

Analysts expect volatility to continue in the coming week with important events like RBI's monetary policy meeting, global market cues, corporate earnings among others will drive the markets.

Here’s breaking down the factors that will drive markets in the week ahead:

RBI MPC meeting
In the upcoming week, a major trigger in the domestic market would be the RBI's rate decision and their commentary on future rate actions. The market is widely expecting a rate hike of 25 basis points. In its December policy meeting, the RBI raised the policy repo rate by 35 basis points (bps) to 6.25%. The CPI inflation has been below the RBI’s tolerance band of 6% for two consecutive months. Analysts are also expecting RBI to hint at a long pause in the next policy meeting, providing direction on future rate actions.

Corporate earnings
Major corporations like Tata Steel, Adani Ports, Ambuja Cement, Bharti Airtel, Hero Motocorp, Hindalco, Lupin and M&M will announce their numbers during the week along with several others.

Macroeconomic data
The industrial output or India Industrial Production (IIP) data for the month of December is set to be released on February 10, which will give an idea into how the economy is doing. The IIP represents manufacturing activity in the economy and measures industrial production for a certain period. The IIP grew 7.1% year-on-year in the month of November.

VIX
The volatility index, which is a measure of the fear in the markets, swung up and down throughout the week and settled at 14.39 levels. Given the number of key events in the upcoming week, analysts expect volatility to continue and investors are advised to remain vigilant and prudent in their investing picks.

Technical factors
The recent rebound in the index has certainly eased some pressure but cues are still mixed. Stability in the global markets is encouraging however the outcome of the RBI meet, earnings and further development of the Adani group will continue to keep traders on the edge.

"On the index front, sustainability above 17,900 in Nifty would further subside the pressure and help the index inch towards 18,200 levels. In case of a decline, 17,550 is critical to hold else the tone would again turn bearish," said Ajit Mishra, VP - Technical Research, Religare Broking.

"As long as Nifty holds above its make-or-break support at 17353 mark, optimism may continue. Nifty’s immediate goal post is seen at the 18000 mark with aggressive targets at the psychological 18300 mark," said Prashanth Tapse - Research Analyst, Senior VP (Research), Mehta Equities.

FII/DII flows
Foreign portfolio investors have turned net buyers for the first day of this month, but went back to their old ways of selling Indian shares for the rest of the week. However, domestic institutional investors have supported the market by buying throughout the week.

Global cues
There are a number of significant events in the global economies taking place in the forthcoming week. To begin with, a balance of trade data of two major economies, the US, and the UK will be released. China will publish its monthly and yearly inflation figures. The UK will also reveal GDP and three-month average GDP figures. Investors across the world will keenly watch these numbers since they will decide the direction of global indices.

Global markets
A strong US job report renewed concerns that the Fed may remain aggressive in its path of interest rate hikes as it tries to tame inflation. Taking cues, a gauge of global stocks dropped more than 1% on Friday. US stocks closed lower, while European stocks ended modestly higher, erasing earlier declines in optimism over the region's economy.

"While it is very helpful to see the jobs increasing, it is really a horse race between that ongoing income and how quickly inflation comes down," said Lisa Erickson, head of public markets group at US Bank Wealth Management in Minneapolis, Minnesota.

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