Weekly market recap: Market watchers and investors look ahead to next week’s RBI interest rate meeting

It turned out to be yet another weak week for the domestic stock market, with the benchmark BSE Sensex and NSE Nifty stock indices continuing to decline for the second week. Market watchers believe that the key rate hike by the US Fed and the Bank of England, coupled with escalating geopolitical tensions between Russia and Ukraine, further dampened market sentiment. Investors are worried about the expensive valuation of Indian equities as well as efforts to stabilize the rupee, which are leading to a rapid depletion of foreign exchange reserves.

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The week ahead is also expected to see high volatility with the F&O series set to expire on September 29th and traders balancing their positions for the next series. In addition, the RBI’s six-member monetary policy committee is due to meet from September 28-30, and is expected to announce its decision on the interest rate review on September 30.
On the economic front, market participants will be watching India’s Infrastructure Consumer and Output Price Index (CPI) data to be released on September 30. new five-year foreign trade policy (FTP) on September 29.

In the international market, investors would watch some economic data from the United States, starting with new home sales on September 27, followed by the announcement of the merchandise trade balance on September 28, the GDP price index , initial UI claims on September 29, and finally the Chicago PMI. , Baker Hughes Total Rig Count on September 30.
Investment strategist Vinod Nair, head of research at Geojit Financial Services, said: “The Fed’s 75 basis point rate hike was well anticipated, but the sustained aggressive stance indicating 125 basis point hikes during of the next two political meetings by December 2022 spooked the market. The Indian rupee fell to a new high of 81 as FII sold off. Prolonged hawkish monetary policy is expected to slow the engine of global growth. India is in a better position with a decoupled economy and a recovery in credit growth and tax collection. However, a rise in geopolitical risk and the economic slowdown will affect India with some lag and weaken performance in the short term.

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Nair added: “Next week, investors will be watching closely the outcome of the RBI’s monetary policy on September 3. There is a consensus that a 50 basis point rate hike will help strengthen the domestic currency. Favorable oil prices and strong local demand can help the RBI maintain the balance between growth and inflation. We expect market direction to be guided by global developments and FII action. In terms of valuations, India is now the most expensive stock market in the world. Therefore, investors are advised to wait and watch until the dust settles.”

This week, major benchmarks fell again, with the 30-stock Sensex down 1.26% to 58,098.92 on September 23 from 58,840.79 on September 16. Similarly, the 50-stock Nifty Index slid 1.16% to 17,327.35. No less than 19 stocks in the Nifty index generated positive returns for investors over the past week. With a gain of 6.01%, Sun Pharmaceutical Industries emerged as the index’s top gainer. It was followed by Hindustan Unilever (up 5.97%), ITC (up 4.50%), Britannia Industries (up 4.26%) and Eicher Motors (up 3.75%). ).

Apollo Hospitals Enterprise, Bajaj Finance, Hero MotoCorp, Titan Company and Cipla also grew by more than 2%. In contrast, Power Grid Corporation of India, Shree Cement and Ultratech Cement declined by 14.03%, 9.09% and 5.17% respectively. On a sector basis, the BSE Fast Moving Consumer Goods Index gained 3.68% over the past week. The BSE Healthcare and BSE Auto indices also generated returns above 1%.
On the other hand, the BSE Power index fell the most by 5.10%, while the BSE Reality, BSE Capital Goods and BSE Banex index fell by 3.95%, 3.02% and 2.98%, respectively.

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Market watcher Shrikant Chouhan, head of equity research (retail) at Kotak Securities, said: “Domestic and international stock markets reacted this week to the decision to hike rates by 75 basis points from the Federal Reserve. The domestic market remained rangebound and major indices gave broadly flat returns this week. Returns for most sector indices this week were in slightly negative territory. However, BSE FMCG and BSE Healthcare saw positive momentum. Global stock markets were under pressure after the Fed’s rate hike and hawkish tone. The yield on 10-year US Treasuries remained high and is now above 3.7%. Globally, inflation, central bank rate hikes, energy prices and recession will remain concerns. Crude oil prices remained broadly stable, but the Indian currency has depreciated in recent days. For the domestic market, one of the key events to watch is the upcoming RBI monetary policy.

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