The coming week is likely to be a volatile one for local equity markets on account of the F&O (Futures and Options) expiry, which is scheduled to take place on November 24, 2022. On the economic data front, market participants will be eyeing foreign exchange reserves data to be out on November 25 for further cues. Foreign exchange reserves in India decreased to $529.990 billion on November 4 from $531.080 billion in the previous week. Meanwhile, the trend in investment by foreign institutional investors and the movement of the rupee against the dollar will also be closely watched by the market participants.
Dr. Joseph Thomas, Head of Research, Emkay Wealth Management, said: “Markets will look forward to the developments in Europe and the statements from leading Fed officials on the future stance of the Federal Reserves. Though price pressures have ebbed, the retail inflation numbers are too high for the comfort of the central banks, especially in the US and India.”
At the same time, he further said, the prominent view is that probably inflation has peaked and that central banks might still hike rates but the quantum of hikes would be more moderate. “Some signs of sluggishness in growth could set in soon due to the aggressive rate action in the last few months. Markets would focus on the actual numbers to get a sense of the trajectory of inflation and official policy as well,” Thomas said.
On the global front, investors would be eyeing a few economic data from the world’s largest economy, the United States (US), starting with Chicago Fed National Activity Index on November 21, Redbook and Fed Mester Speech on November 22, API Crude Oil Stock Change, Initial Jobless Claims, S&P Global Manufacturing PMI, S&P Global Services PMI, S&P Global Composite PMI, New Home Sales, EIA Crude Oil Stocks Change, Baker Hughes Total Rig Count on November 23, and FOMC Minutes on November 24.
Vinod Nair, Head of Research at Geojit Financial services, said: “During the week, the direction of the domestic market was largely driven by the trend of global peers. Global markets were surging in the expectation that the Fed will scale back its aggressive rate hike in reaction to easing U.S. inflation data. However, the euphoria was dashed by better U.S. retail sales in October and aggressive remarks from Fed officials. Domestic CPI inflation has moderated to 6.8% owing to declines in food and commodity prices, however, it remained above the RBI’s tolerance level. The CPI is estimated to fall within the range from Q1 FY24.”
“Although domestic macroeconomic indicators and FII inflows are favourable, negative vibes from global markets and premium valuation compared to peers, the domestic market traded with caution. In the absence of major domestic triggers, the domestic market is expected to continue its focus on global trends. Considering the current market scenario, a balanced approach with a mix of equity & debt, 60:40 for an average risk-averse investor, is advised as interest yields are becoming attractive, and the economy is slowing,” Nair added.
