US inflation, major central bank rate decisions to weigh on Indian equities

NEW DELHI:  The week gone by saw Indian equity markets ignoring two big events – RBI’s Monetary Policy announcements and State elections results – and remained range-bound without reacting much to either. Benchmark equity indices – Sensex and Nifty – moved within a 1.3 per cent range and closed 0.5 per cent lower than the previous week. 

The general belief that the market has moved in the premium valuation range, might have prevented investors from taking bullish bets despite the fact that the BJP, which is in power at the Centre, won an emphatic victory in PM Narendra Modi’s home state Gujarat. The markets also ignored the fact that the RBI has delivered on the much-anticipated moderation of the repo rate hike.

Though buying was seen in FMCG, Pharma and Banking sector stocks, IT sector stocks saw a sharp fall after HCL Tech said that it expects FY23 revenue growth to be at the lower end of its 13.5 per cent-14.5 per cent guidance. But can the markets remain oblivion to other major global events in the current week?

The two major events slated this week are US inflation numbers followed by US Federal Bank’s interest rate decisions. A lower-than-expected retail inflation number in the US and the policy response to the inflation numbers may decide the future policy stance of the global central banks including that of India.

Analysts see the market to remain volatile with a downward bias. Vinod Nair, Head of Research at Geojit Financial services, says that the volatility in the market is expected to remain as we await the domestic and US inflation numbers, and the Fed’s interest rate decision next week.

The US Fed is projected to raise interest rates by half a percentage in its final meeting of the year, which will take place on 13–14 December 2022. “We expect the consolidative mode to continue till central banks like the US Fed, ECB, and BoE announce their policy moves next week,” says Siddhartha Khemka, Head - Of retail Research, Motilal Oswal Financial Services.