Markets ahead of the week: buzz from RBI’s November 3 rate hike likely to sustain indices

Indian markets are likely to witness a cautious tone from investors as another possibility of RBI’s rate hike will be closely watched at their upcoming meeting on November 3. Globally, the European Central Bank (ECB) has already raised interest rates by 75 bps, while the likelihood of a fourth aggressive 75 bp hike by the US Federal Reserve in November policy is very slim. The RBI is expected to continue raising rates as inflation rose to a 5-month high of 7.41% in September. In addition, the second quarter results, macroeconomic data and the flow of foreign funds, along with global markets, will play a role in influencing domestic stock sentiment. Both Sensex and Nifty 50 registered nearly 1% gains last week. Sensex is currently just below 60,000 and Nifty 50 is a few points away from crossing the 17,900 level.

Last week, on Friday, Sensex closed at 59,959.85, up 203.01 points or 0.34%. While Nifty 50 finished at 17,786.80 higher by 49.85 points or 0.28%. The rise in heavyweight stocks kept the performance on a positive front, with Maruti Suzuki and RIL seeing strong buys. Auto stocks outperformed their counterparts amid key Q2 results and ahead of monthly sales data. While oil and gas, consumer discretionary and energy stocks also contributed to the upside.

Meanwhile, foreign investors emerged as net buyers in the week between October 24 and October 28. FII inflows into the stock amounted to 3,986.25 crore during the week.

On the downside, in the interbank forex market, the rupee ended largely flat at 82.47 against the US dollar on Friday. However, the local unit posted a weekly gain in hopes of a reduction in the magnitude of US Federal Reserve rate hikes as a result of December policy.

Commenting on the weekly performance from October 24-28, Vinod Nair, Head of Research at Geojit Financial Services, said: “The domestic market remained flat with a positive trend throughout the week as favorable domestic signals were countered by a mixed global mood. US GDP grew 2.6% in the quarter ended September, but failed to rally the market as US tech stocks sold off significantly after disappointing quarterly results and a bleak forecast as the ECB raised interest rates by 75 basis points, also indicating that it is making progress in fighting record inflation, although the likelihood of a recession has increased.An expectation that central banks would slow the pace of rate hikes from the start of CY23 comforted global markets. bond yields around the world softened, with a US 10 annual yield that dips below 4%.”

What to expect in the markets during the week of October 31 to November 4

RBI last week announced an additional meeting of the MPC scheduled for November 3, 2022.

dr. Joseph Thomas, Head of Research, Emkay Wealth Management said: “The ECB’s 75 bp hike in key interest rates and the likelihood of an aggressive Fed rate hike at the FOMC meeting scheduled for next week, and the encouraging numbers of US GDP are factors that could affect markets in the coming week.The MPC Special Supplementary Meeting convened by the RBI for November 3, 2002, and the possibility of further rate hikes given ongoing inflation, is something to be seen the market is cautiously considering it at the moment. We may continue to see some volatility in the markets as we head into the new week.”

It should be noted that the RBI has already raised the repo rate by 190 basis points for the past four consecutive policies, bringing the rate currently at 5.9%. The reason behind the increase is to curb inflation, which has been high for more than a year. Indian CPI inflation has remained above the upper bound of the RBI for the past nine straight months. Inflationary pressures have greatly affected the prospects for global economic growth. Majority experts have factored in RBI to continue the trend of rate hikes for at least December 2022.

While, Shrikant Chouhan, head of Equity Research (Retail), Kotak Securities said, “the global situation remains challenging. In the coming weeks, Indian markets will focus on domestic macro data and quarterly results and management commentary will drive stock prices. Specific action.”

According to Nair, the strengthening rupee, along with declining government bond yields and decent Q2 results, will support the domestic market in the near term.

According to Mitul Shah – Head of Research at Reliance Securities, the market fears that more rate hikes by the US Fed could harden US Treasury yields again, which could weaken the rupee further. The revenue season for the second quarter of 23 has so far witnessed healthy sales growth, but higher inflationary pressures took a toll on profitability. Inflation remains sticky, both in the domestic and US economies. India’s growth remains strong and is expected to be one of the fastest growing economies in the world, while the global recession and slowing growth for major economies continued. The market is looking at the US Fed’s monetary policy meeting scheduled for November 2. Comments on festive demand, the inflation outlook and the rate hike will be closely watched in the near term.

Disclaimer: The opinions and recommendations expressed above are those of individual analysts or brokerage firms, not Mint.

Check out all the business news, market news, latest news events and latest news updates on Live Mint. Download the Mint News app to get daily market updates. More or less

Leave a Comment