Indian Stock Market Outlook: Key Factors to Watch
The Indian stock market is currently influenced by a number of global and domestic factors. HereS a breakdown of the key elements analysts are monitoring:
1. US Federal Reserve Rate Decision: Market expectations are centered around a potential rate cut by the US Federal Reserve in its upcoming meeting. While a 25 basis point (bps) cut is largely priced in, a larger 50 bps reduction could significantly boost investor sentiment and extend the recent rally on Dalal Street, according to Anuj Gupta of Ya Wealth.
2. Global Central Bank Decisions: Beyond the US, the decisions of the Bank of England and the Bank of Japan regarding interest rates will be closely watched for their impact on global liquidity and overall risk appetite, notes Siddhartha Khemka of Motilal Oswal.
3. India-EU Trade Deal Progress: Negotiations between India and the European Union are reportedly progressing positively, raising hopes of a trade deal. This could potentially avert proposed 100% tariffs on Indian goods suggested by former US President Donald Trump, as per Anuj Gupta.
4. India-US Trade Relations: Improved interaction between US President Donald Trump and Indian Prime Minister Narendra Modi on social media platforms has already spurred buying activity in the Indian stock market. Further advancements in India-US trade negotiations are expected to further bolster investor confidence, according to Siddhartha Khemka.
5.Foreign Institutional Investor (FII) Activity: Analysts are emphasizing the importance of monitoring FII trading patterns. N ArunaGiri, Founder & CEO at TrustLine holdings, points to several factors currently influencing FII behavior:
* Lack of Earnings Traction: heavyweight indices haven’t demonstrated strong earnings growth, leading to high valuations and hindering a definitive market breakout.
* Rupee Weakness: The continued depreciation of the Indian rupee is negatively impacting foreign investor sentiment, especially in a volatile global currency habitat.
* MSCI Emerging Market Re-rating: India’s diminishing weight in the MSCI Emerging Market index,coupled with China’s re-rating,has led to FII outflows exceeding $4 billion in August.
ArunaGiri suggests that a weakening US dollar and credible domestic structural reforms could reverse this trend and attract FII inflows. though,until these concerns are addressed,a correction phase or lateral market movement is anticipated.
Recent FII activity offers a glimmer of hope. Following a hint of a potential visit to India by former US President Trump, FIIs turned net buyers on Friday, acquiring approximately ₹1,977.81 crore worth of Indian shares in the F&O segment and around ₹130 crore in the cash segment. Anshul Jain of Lakshmishree investment stresses the importance of observing FII trade patterns on Monday to gauge the sustainability of this trend.
Disclaimer: The views and recommendations presented here are those of individual analysts and broking firms,and do not represent the views of Mint. Investors are advised to consult with qualified financial advisors before making any investment decisions.
