The Indian stock market overall gained around 3% during the last week, recovering all early losses to sharply rise despite volatility in overall global stock markets. Analysts now highlight that the market’s direction during the upcoming week will be determined by RBI MPC meet outcome, oil prices and other key factors.
Sensex and Nifty extended gains for a third consecutive session on Friday, with the benchmark indices ending higher amid overall bullish global market sentiment. Sensex rose 166.5 points to close at 78,095, while the Nifty 50 gained over 66 points to end the session at 24,384. Broader markets also remained in the green, with the Nifty Midcap 100 and Nifty Smallcap 100 indices rising more than 0.4%.
Here are the 6 key factors that will likely determine market movement during the upcoming week between August 3 (Monday) and August 7 (Friday).
1) RBI MPC meet outcome
The Reserve Bank of India (RBI) is likely to announce the outcome of its Monetary Policy Committee (MPC) meeting on August 5. While the Indian central bank is expected to keep the repo rate unchanged at 5.25%, policymakers expected to adopt a wait-and-watch approach amid heightened uncertainty over inflation, growth and global conditions, according to a research report by Nuvama.
The RBI's guidance on the future policy path is expected to be closely watched, especially its assessment of inflation risks, liquidity conditions and the external environment, the report said. The central bank may prioritise liquidity management over further rate action in the near term, while retaining a calibrated and flexible policy approach, it added.
Also read | RBI likely to hold repo rate at 5.25%, market to focus on policy guidance: Nuvama
2) Iran-US war
US President Donald Trump has threatened further military action against Iran as Washington continues efforts to reopen the Strait of Hormuz, while fresh attacks in the region targeted Kuwait and commercial shipping, escalating tensions across the Middle East.
Iran has repeatedly targeted vessels attempting to pass through the Strait of Hormuz without its approval amid its ongoing conflict with the US. The market will closely track the situation in the Middle East that triggered the sharp selloff earlier this year.
3) Oil prices
Oil prices closed more than $1 per barrel higher on Friday, ending July with their biggest monthly gains since March, as concerns over global crude flows mounted on Iranian reports that some tankers were forced to turn back in the Strait of Hormuz. Rising oil prices can trigger inflationary worries, which may spook investors.
4) FII buying
Foreign investors remained net buyers of Indian equities for three consecutive sessions, after a five-day long selling streak. Overall during the month, foreign investors mostly remained bullish on Dalal Street as global tech rout may have dampened sentiment for other markets.
“A significant recent trend is the FPIs buying into Indian mid and small cap stocks. The high growth potential of this segment is the principal reason for the increasing FPI allocation to these segments,” said VK Vijayakumar, Chief Investment Strategist at Geojit Investments.
5) Global tech trade
After a sharp selloff, tech stocks gradually began to regain strength after strong earnings from Microsoft and Amazon boosted investor confidence. Strong momentum in this trade can in turn lead to some downturn on Dalal Street, which was for so long enjoying its ‘anti-AI’ position.
“The excessive volatility in markets like South Korea and Taiwan and the concentration risk in the ‘chip trade’ are prompting the FPIs to look for stabler markets like India. The stability in rupee and fair valuations of India’s large cap stocks are other factors that are facilitating the renewed FPI inflows into India.,” Vijayakumar added.
6) Earnings
As many as 573 companies are set to announce their earnings for the April-June quarter (Q1 FY27) this week, with notable names including Westside and Zudio-parent Trent, public lender SBI, ecommerce major Nykaa, telecom giant Bharti Airtel, Titan and others.
What lies ahead?
Looking ahead, the sustainability of the domestic market recovery will depend on the easing of global uncertainties, stability in crude oil prices, and a broadening of earnings growth beyond a handful of sectors, said Vinod Nair, Head of Research at Geojit Investments. He further said that investors will closely track U.S. labour market data in the coming week, while domestically, the RBI's policy decision and PMI releases will provide key cues on growth and inflation trends.
“We continue to favour a gradual accumulation of quality companies with strong earnings visibility,” according to the analyst.
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(With inputs from agencies)
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
