Will Fed fear continue to feed Nifty bears this week? 5 cues to watch out for

The week gone by was not as bad for Dalal Street investors as it was for those on Wall Street. While the Nifty closed the week down just 0.11 per cent, the Dow Jones fell 3 per cent, and the Nasdaq lost over 4 per cent of its value after US Fed Chair Jerome Powell’s ultra-hawkish comments. Back home, the midcap and smallcap indices, in fact, ended green on the weekly charts.

In the absence of any major event this week, market participants will be eyeing global markets for cues.

“Going forward, investors would likely take cues from the action of global central bankers, global growth trajectory and movement of commodities. Back in India, investors' focus would likely be on management commentary of demand and margins in the festive season, pace of government capital expenditure and trajectory of rural growth,” said Shibani Sircar Kurian of Kotak Mutual Fund.

Here’s breaking down the cues for equity traders this week:

FII flows
After pouring in over Rs 51,000 crore in Indian equities last month, FII flow has been erratic in the last two trading days amid increasing dollar index and US bond yields.

Dr VK Vijayakumar of said FIIs are likely to continue investing in India. “They have learned that exit is easy, but entry is expensive,” he said.

Macros
After recording 13.5 per cent growth in real GDP in the June quarter, India surpassed the UK to become the world’s fifth largest economy. On Monday, India’s PMI data will be released. Investors would also be eyeing the US PMI data and US initial jobless claims data for more cues. On September 8, the European Central Bank is set to announce its rate decision.

Across the globe, investors will be keeping a close watch on China’s inflation numbers as well.

Dollar Index
One of the top worries for investors is the spike in the US dollar index to above 109 level, which may impact FII flows.

Crude Oil
Brent crude oil prices dropped nearly 8 per cent last week. Oil traders are now expecting that the OPEC+ will discuss output cuts at its Monday meeting, though concern over China's Covid-19 curbs and weakness in the global economy loomed over the market.

Powell's Speech
After Powell’s hard talk at the Jackson Hole symposium on August 26, the US Fed chair will speak at the Cato Institute Conference on monetary policy on September 8.