Fed Meet | FII: Inflation data, Fed meet, FII flows among 7 key factors that may guide markets this week

On Friday, the Nifty50 ended below the crucial support level of 18500 points at 18497 points with 0.6% losses. Even though BSE Sensex managed to close above the 62000 mark, the index shed 0.6% and settled at 62182.

For the week, both indices fell over 1%, marking the biggest weekly losses in over three months.

The coming week will be crucial for equities as key macroeconomic indicators in India and the US and the US Federal Reserve’s monetary policy action will decide whether the bulls or the bears are likely to have a Christmas party.

“The three large economies – the US, the UK, and India – will disclose their inflation rate. As a result, the world’s markets will be closely monitoring these numbers and hoping for an improvement,” said

Apurva Sheth, head of markets at Samco Securities.

Additionally, the US and UK will be making their interest rate announcements, which will keep the global markets active.

Macroeconomic data

India on Monday will release the consumer price index-based inflation data for November and industrial production print for October.

Retail inflation based on the CPI index is likely to have eased to around 6.4% in November, which will be the lowest reading in 9 months. However, this is largely due to a low base effect.

Meanwhile, industrial output is expected to have slowed down considerably in October from 3.1% in September largely due to an unfavourable base. Along with India, the UK will also release its industrial production data for October.

On Tuesday, all eyes will be on the consumer inflation data of the US, as it comes just before the Federal Reserve’s policy decision. The inflation is expected to have eased further in October to 7.3% from 7.7% a month ago.

On Wednesday, the UK will release consumer price inflation data for November. Later in the week, China will release industrial production data for October, which will be closely tracked to gauge the impact of the stringent COVID-19 curbs.

US Fed meet
The big event for the week that will keep investors on edge is the Fed’s policy decision. The two-day meeting of the central bank will begin on Tuesday, and the central bank is widely seen raising interest rates by 50 basis points after taking a 75 bps hike for four consecutive times.

Earlier this month, Fed Chairman Jerome Powell indicated that the aggressive tightening might be over, and one could see a smaller quantum of hike in rates this month. A 50-bps hike has been largely factored in by the market, and therefore, equities could gain if the hike is on expected lines and is accompanied by dovish comments by Powell.

The week will also see the Bank of England and European Central Bank releasing their interest rate decisions on Thursday.

Corporate data
The week will also see the insurance regulator Insurance Regulatory and Development Authority of India (IRDAI) releasing the industry’s first-year premium data for November. The Society of Indian Automobile Manufacturers (SIAM) will release the sales data for the automobile industry for November.

Investors will also watch out for the fortnightly revision in windfall gains taxes on domestic crude oil and fuel exports.

Dollar/Yield movements
The dollar remained largely strong against the rupee in the last week amid gains in the currency globally. The dollar index gained 0.4% last week. Investors will watch out the movement of the index in the run-up to Fed’s policy meeting. Similarly, the movement in the 10-year Treasury note in the US will also be closely tracked by investors.

FII Flows
The strength in the dollar last week saw foreign institutional investors book profits in equities. FPIs net sold Indian equities worth $447 million last week. The key events in the coming week will decide the trajectory of the flows.

Global brokerages are turning bullish on emerging markets like China and Taiwan after the massive correction in these markets is also seeing a shift in money to these markets within the emerging market pack.

“There is a trend of money moving into cheaper markets like China and South Korea where the valuations are compelling now. Even though India will continue to attract foreign capital, the high valuations in India will be a deterrent,” said V K Vijayakumar, chief investment strategist at

.

IPO Watch
The week will also see some companies making their debut on the bourses. Uniparts India, whose initial public offering received an overwhelming response, will list on the bourses on Monday. Grey market trends indicate that the stock may not see superlative listing gains.

Sula Vineyards and Abans Holdings will launch their IPOs on Monday. While the former’s issue will conclude on Wednesday, the latter’s IPO will close on Thursday.

Technical Indicators
Charts show that the Nifty50 is placed slightly above the support of ’20-day EMA’, which coincides with the previous swing high of 18450. “Hence, we continue to remain upbeat as long as 18400 – 18300 is not violated on a closing basis,” said Sameet Chavan, chief technical and derivative analyst at Angel One.

Any intermediate decline should only be construed as a profit booking before resuming the upward trend, Chavan said.

On the upside, 18650–18700 are the levels to watch out for. If Nifty 50 surpasses these levels, one should gear up for yet another milestone of 19000 in the near future.

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