MPC Meet, Inflation, Oil Price, Other Factors to Watch

Markets this week: Markets settled into a flat tone last week, followed by a sell-off in banks, consumer durables, metals, IT and auto stocks. Markets ended higher for the third week in a row, largely driven by positive global signals in the latest session. On the home front, favorable updates on monsoon progress further boosted sentiment. After a strong start to the week, the benchmark index hovered in a range until the end, but maintained a positive tone, thanks to healthy buying in some major indexes across all sectors. As a result, the Nifty index ended up 1.4% to close at the 16,584 level. The broader indices also saw decent traction, with mid and small caps ending up 1.3% and 4.4% respectively.

Ajit Mishra, Vice President – Research, Religare Broking Ltd, said: “With the earnings season behind us, the focus would be on the next MPC monetary policy review meeting, scheduled for June 6-8. . Markets have already priced another rise citing sticky inflation, but the focus would be on commentary amid updates of a favorable monsoon. In addition, the performance of global markets and the development of crude will also be a focus. On the macro side, participants will review PII data on June 10. »

RBI meeting

The Reserve Bank of India’s monetary policy committee will meet next week and the outcome is expected on June 8. Experts forecast a rate hike between 25 basis points and 50 basis points by RBI following the trend of the US Fed. In addition, the reactions of banks to their loans and deposits amid the RBI policy repo rate change will be closely watched.

ECB meeting

Apart from the Reserve Bank of India, the European Central Bank is also expected to meet next week with the outcome expected on June 9. The ECB recently suggested it needed to act quickly on interest rate hikes after eurozone inflation hit multi-year highs and broke the eight percent mark in May.

crude oil price

The price of black gold will be in focus next week, as a recent rise in the price of the commodity has investors worried about the path of inflation. Global Brent crude oil futures hit a high of $123 a barrel last week amid new sanctions imposed on Russia by the European Union. Prices cooled towards the end of the week when the Organization of the Petroleum Exporting Countries (OPEC) moved to increase oil production to ease supply pressures.

Macroeconomic data

Several key economic data points will also be on investors’ radar next week. The Street will be watching China’s inflation data for May for signs of economic recovery as lockdowns ease in cities like Shanghai. Additionally, India’s industrial production data for April will also be released later next week. Additionally, global markets will be watching the balance of trade data in China and the inflation print for May in the US.

FII Sale

Selling pressure from Foreign Institutional Investors (FIIs) will continue to dominate the investor psyche as the cohort remained net sellers of Indian stocks for another week. Last week, FIIs were net sellers at Rs 3,417 crore bringing their total for the year to Rs 1.8 lakh crore. Their selling momentum has slowed significantly over the past week, raising hopes that the cohort may soon become net buyers in the market.

Clever technical insights

The Nifty 50 index failed to hold above its 50-day moving average of 16,870 points on Friday and closed the day below that crucial level. “A long negative candle has formed on the daily chart after a higher open. Technically, this pattern indicates a bearish (not classic) type candle pattern counterattack formation at the highs. such a pattern in the middle of a range move rules out any significant negative impact for now,” said Nagaraj Shetti, technical research analyst at HDFC Securities.

Shetti, however, asserted that the market’s short-term uptrend is still intact and there are no signs of a reversal yet. Support for the index should be seen around 16,350-16,400 points while 16,800 points remains a key resistance.

What should investors do?

Mishra said: “Markets have seen a rebound over the past 3 weeks but the decision lacks decisiveness due to lingering challenges such as global tightening due to inflation, geopolitical tensions etc. will put the bears back in-game. During this time, participants should focus on sector/stock selection as the markets offer opportunities on both sides, but avoid going overboard.

The views and investment advice of the experts in this report are their own and not those of the website or its management. Users are advised to check with certified experts before making any investment decision.

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Steve R. Hansen