Benchmark indices – BSE Sensex and Nifty50 – gained up to 2 per cent during the week. BSE Midcap index gained more than a per cent, whereas index gauged to smallcap stocks rallied 3 per cent.
Ajit Mishra, VP – Research,
Broking said, “Markets ended higher for the third straight week largely led by positive global cues. On the domestic front, favourable updates on monsoon progress further boosted sentiment.”
Markets have been witnessing a rebound for the last 3 weeks. However, the move lacks decisiveness due to lingering challenges like global tightening due to inflation, geopolitical tension, and other factors, he added.
Among the sectoral front, BSE realty and energy indices gained 5 per cent each, whereas IT index zoomed 4 per cent. Power and utilities index topped the laggers with a 5 per cent fall, whereas the healthcare index dropped 2 per cent.
The continuous rise in crude oil prices due to the EU’s decision to partially ban Russian oil hindered the global market, said Vinod Nair, Head of Research at
“However, the lack of confidence in the domestic market resulted in a sell-off towards the closing hours of the week driven by concerns over central bank policy,” he added. “The RBI is expected to hike rates by 25bps to 35bps.”
Below are six key factors that may guide markets this week:
RBI’s MPC meet
Led by the governor Shaktikanta Das, the Reserve Bank of India’s (RBI) Monetary Policy Committee is set to meet this week on June 6-7 (Monday-Tuesday) with Das announcing the outcome of the meeting on Wednesday morning. Market participants believe that rate hike is a no-brainer considering the rising inflation in the country.
The Reserve Bank is expected to go for another rate hike of 0.40 per cent at the scheduled review of the monetary policy, said global brokerage firm BofA Securities. In a surprise on May 4, the RBI had hiked rates by 40 basis points.
The United States and China, the world’s two largest economies, will announce their inflation numbers on June 10, Friday. Inflationary worries in the world’s two biggest superpowers may dent sentiments in the market.
The US has been struggling with
high inflation, the worst in more than four decades, whereas consumer prices are near multi-month high after the Covid-19 led curbs prompted locals to stock up on food. In April, China reported more than expected rise in the prices.
India will report its numbers for industrial output and manufacturing productions for the month of April in the upcoming week. It will represent the health of Indian industries and manufacturing in the new fiscal year.
Industrial production measures the output of businesses integrated in the industrial sector of the economy, whereas manufacturing production measures the output of businesses operating in the manufacturing sector, accounting for 78 per cent of industrial output.
Industrial production growth has remained subdued at 1.9 per cent in March 2021, compared to a year ago. Poor performance by manufacturing sectors and Covid-19 had dented sentiments.
Crude oil prices would be a key trigger for the movement of markets as India heavily depends upon its imports for energy needs, making it among the top demanders for petroleum products. Crude has been rising for six weeks now.
There has been plenty of turmoil in oil markets this week, with the EU banning Russian oil, OPEC accelerating its production increases, and US inventories dropping once again.
“Oil settled higher for the week, supported by expectations that OPEC’s decision to increase production targets by slightly more than planned will not add much to global supply which should tighten as China eases COVID restrictions,” said Deepak Jasani, Head of Retail Research,
Global investors have been on a selling spree in the Indian equity market for quite a long period. FPIs have been pulling out funds for eight months now, making it their longest exit streak. In the first three sessions of June, they have pulled out more than Rs 6,000 crore.
The rising interest rates across the globe have resulted in FIIs pulling out a whopping Rs 1.62 lakh crore from local shares in the calendar year-to-date, the highest-ever net sale by foreign investors in Indian stock markets in less than five months.
VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said, “If the dollar and the US bond stabilises, FPI selling is likely to stop and may even reverse. On the contrary, if US inflation remains elevated and dollar and bond yields continue to rise, FPIs may resume selling. US inflation data is the key”.
Nifty50 ended the week on a high note, signalling that a short-term minor bottom has been formed. In accordance with global benchmark indices, Nifty is expected to give an immediate resistance breakout, indicating continuance of the bullish short-term trend, said Yesha Shah, Head of Equity Research, Samco Securities.
“However, there is no substantial proof that the corrective phase has concluded. Given this, we recommend that traders retain a mildly bullish to cautious perspective going ahead and use a stock-specific buy-on-dips strategy. Nifty’s next immediate resistance level is currently set at 17,400,” she added.