RBI MPC meeting to US job data: 5 factors that may impact stock market this week

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Stock market this week: Following strong global cues and return of foreign investors (FPIs and FIIs), Indian stock finished higher on third straight session on Friday. In the week gone by, Nifty 50 index gained 2.62 per cent last week whereas it logged 8.70 per cent monthly gain in July 2022. Similarly, BSE Sensex shot up 2.67 per cent las week while it recorded monthly gain of 8.50 per cent in July 2022.

“The July month proved to be a relief for market participants as after a sharp correction in the previous three months, Nifty rallied in this month and posted gains of over 8 percent. The up move was led by the banking and financial space but off late all the sectors participated which resulted in a broad market rally. Now the Nifty has reclaimed the 17000 level, so let’s see some data to predict whether the up move will continue in the short term or reverse. Firstly, if we look at the derivatives data, the rollovers were slightly lower than the average and the up move in July has been mainly due to a combination of short covering and long formation. FII’s who were aggressive sellers in the last three months have covered their short positions and in fact they have started the August series with net long positions in the index futures,” said Ruchit Jain, Lead Research at 5paisa.com.

“Nifty Bank index dominated the benchmarks by rising over 12% during the month. The index is now hovering near 37500 mark which is the potential reversal zone of a bearish harmonic pattern called CYPHER. On the upside; 38000 is also a reversal zone for bearish SHARK pattern. Thus we expect some profit booking from the zone of 37,500 to 38,500 during the coming month. On the downside; 36,800 to 36,200 might prove to be an important supports for the coming week,” said Mehul Kothari, AVP — Technical Research at Anand Rathi.

After the good July show at Dalal Street, stock market observers are expecting its repetition in August as well. However, investors are advised to remain vigilant about the major triggers that may dominate stock market movement.

Here we list out top triggers that may impact stock market this week:

1] RBI MPC meeting: “Markets are expecting the RBI to hike repo rates by another 50 basis points next week to 5.4% from the current 4.9%. This would underline how the RBI is balancing between taming inflation and promoting economic growth. The comments by the RBI governor will have a moving effect on markets next week,” said Sreeram Ramdas, Vice President at Green Portfolio.

2] US job data: US Non-farm payrolls and employment data would provide cues about the health of the jobs market in the US and guide the Fed’s monetary policy path ahead.

“US job data is an important trigger as US markets closely follows US GDP and US job data. As US GDP numbers estimated this week have been disappointing. If US job data also comes disappointing then it would put dollar index under immense pressure leading to sharp recovery in national currency and the market morale. So, one needs to remain vigilant about the US job data coming next week,” said Anuj Gupta, Vice President — Research at IIFL Securities.

3] Bank of England interest rate: “The bank of England is expected to hike interest rates by another 25 basis points to 1.5 per cent next week. Retail sales, mortgage approval rates, consumer deposits, and consumer confidence have taken a toll due to sky-high inflation in the UK while consumer borrowings are peaking for the wrong reasons. Further interest rate hike signals or any surprise commentary might further hamper the UK economy,” said Sreeram Ramdas of Green Portfolio.

4] Q1 results: Nearly 1/5th of the companies in the NIFTY 50 from various industries report earnings next week. These prints will provide insights into consumer demand strength and automobile demand uptick. Earnings from several small and mid-cap companies that are heavily reliant on the US are expected to see some cool-off in growth figures owing to the technical recession the US has entered into.

5] DII FII data: Though FIIs have remained net sellers in the month of July, they are signaling buying interest. If dollar index and bond yield continue to go down, FIIs are expected to stop selling and in that case Indian stocks may witness sharp upside as DIIs are already pumping money in the markets,” said Anuj Gupta of IIFL Securities.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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