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The Indian stock market is bracing for a potentially volatile week, influenced by a confluence of global and domestic factors. Having snapped a six-day winning streak on Friday, the market is keenly awaiting cues from the US Federal Reserve's (Fed) monetary policy stance and its ripple effects on foreign institutional investor (FII) activity. Jerome Powell's recent address at the Jackson Hole Symposium has injected a dose of optimism into the market, with expectations mounting for a US Fed rate cut in 2025. This anticipated shift in monetary policy has already begun to impact the US dollar and bond yields, potentially setting the stage for a reversal in FII selling patterns in the Indian market. The Nifty 50 index, after losing 213 points to close at 24,870, faces a crucial resistance level between 25,250 and 25,300, which will be a key determinant of the market's trajectory in the coming days. The BSE Sensex mirrored the Nifty's decline, shedding 693 points to close at 81,306, while the Bank Nifty index corrected 606 points to finish at 55,149. Despite the overall market downturn, certain sectors, particularly auto, demonstrated resilience, with M&M, Maruti, and BEL emerging as top performers within the Nifty pack. Conversely, stocks such as Grasim, Asian Paints, and Adani Enterprises experienced a challenging session, ending as major losers. Experts suggest that the Indian stock market may witness a trend reversal on Monday, driven by improved global sentiments following Powell's speech. The anticipation of a US Fed rate cut is expected to provide a fresh impetus to Dalal Street bulls, potentially overcoming the recent market correction. However, the market's ability to sustain a bullish trend will depend on its ability to breach the resistance level of 25,250 to 25,300. Continuous FII selling has been a persistent concern for the Indian stock market. However, the US Fed rate cut hope has triggered expectations of a fresh push for Dalal Street bulls. The Jackson Hole Symposium, US Fed rate cut buzz, RBI rate cut trigger, dip in US dollar and bond yield, etc., are some primary triggers that may dictate the Indian stock market next week. The market's response to these factors will determine whether the recent optimism translates into sustained gains or a temporary reprieve from the prevailing bearish sentiment.
Several key triggers are expected to shape the Indian stock market's performance in the upcoming week. The foremost among these is the US Fed rate cut buzz, which has gained significant traction following Jerome Powell's dovish signals at the Jackson Hole Symposium. Sugandha Sachdeva, Founder of SS WealthStreet, believes that the Indian stock market is poised to open on a positive note, drawing inspiration from Powell's acknowledgement of the rising risks of a weakening US job market. This acknowledgement has fueled speculation that the Fed may shift its monetary policy stance to support employment and growth, potentially leading to a rate cut. The second key trigger is global cues, particularly the performance of the US stock market. Anuj Gupta, Director at Ya Wealth, anticipates that the Indian stock market will closely track global developments after the Jackson Hole Symposium. The global market is currently expecting a 25 bps US Fed rate cut, which is expected to inject liquidity into Dalal Street. However, Gupta cautions that this liquidity boost may not be sufficient to propel the Nifty 50 beyond the resistance level of 25,250 to 25,300. The third trigger is FII trade patterns. FIIs have been consistently selling in the Indian stock market, but the US Fed rate cut buzz has raised expectations of a trend reversal in their trade patterns. This is because the rate cut buzz has put downward pressure on US bond yields and the US dollar, making Indian assets more attractive to foreign investors. FIIs showed a mixed trend last week, turning buyers in select sessions but remaining largely cautious overall, with a net outflow of approximately ₹1,559.51 crore. DIIs remained consistent net buyers, providing steady support to the market with a net inflow of around ₹10,388.23 crore.
The fourth significant trigger is the possibility of an RBI rate cut. Sugandha Sachdeva suggests that a Fed rate cut could provide the Reserve Bank of India (RBI) with added flexibility to consider a final 25-bps rate reduction in its upcoming policy review. This potential rate cut could mark the culmination of the current easing cycle, further stimulating economic growth and boosting investor sentiment. However, the decision of the RBI will depend on a careful assessment of domestic economic conditions and inflationary pressures. The fifth and final trigger is the ongoing Russia-Ukraine war. Despite recent meetings between Trump, Putin, and Zelensky, uncertainty surrounding the conflict persists. Anuj Gupta emphasizes that the geopolitical tension remains a significant risk factor that could disrupt market dynamics at any time. Any escalation of the conflict or unexpected developments could trigger volatility and negatively impact investor confidence. In conclusion, the Indian stock market faces a complex interplay of factors in the coming week. The US Fed rate cut buzz, global cues, FII trade patterns, the possibility of an RBI rate cut, and the ongoing Russia-Ukraine war will all contribute to shaping the market's trajectory. Investors are advised to exercise caution and closely monitor these developments before making investment decisions. The market's ability to overcome the resistance level of 25,250 to 25,300 will be a crucial test of its underlying strength. While the anticipated US Fed rate cut provides a glimmer of hope, the potential for geopolitical shocks and other unforeseen events remains a constant threat. The interplay of these factors will ultimately determine the direction of the Indian stock market in the week ahead, making it a period of heightened uncertainty and potential opportunity.
Source: US Fed rate cut buzz to FPIs' selling: Top five triggers for the Indian stock market next week