fii: FII flows, dollar index among key factors to dictate market move this week – Blue Barrows

Benchmark indices showed exuberance on Friday after the Reserve Bank of India hiked key policy rates on expected lines. Nifty gained over 275 points to close at 17,094, while Sensex climbed more than 1,000 points to end the week at 57,426. Nevertheless, on a weekly basis, benchmark indices registered a fall of over 1%.

The US markets, on the other hand, tumbled on Friday, with all the 3 major indices seeing a sharp cut of over 1% amid worries over inflation and escalating Russia-Ukraine conflict.

Vinod Nair, Head of Research at

, said that Fed’s hawkish approach to tame inflation through aggressive interest hikes was a misfortune for the domestic market’s bull-run. Although the domestic economy is buoyed by solid fundamentals, the stock market’s appetite for risk has been hindered by the rising worry of a worldwide recession.

However, an in-line rate hike along with the RBI’s confidence in the economy’s growth momentum helped the domestic market to alter the losing streak, he added. Markets will be shut on Wednesday on account of Dussehra.

Here are the triggers for equity traders this week:

Domestic macro data

Domestic macro data will influence the trajectory of Indian equities. Gross revenue from goods and services tax (GST) in September logged 26% growth YoY, surging to Rs 1,47,686 crore. Also, the manufacturing PMI and services PMI for September due to be released on October 3 and October 6, will have a bearing on the markets.

Auto sales data

Monthly sales data by auto companies for September was released on October 1. Mumbai-based

reported a 44% YoY jump in its total domestic sales at 80,633 units while reported a 1.95% decline in total sales to 5,19,980 units during the last month as against 5,30,346 units in the same month last year.

FII flows

Fearing that the US Fed’s aggressive rate hike move would lead to recession, FIIs started to pull back funds from Indian capital markets in September. According to NSDL data, FIIs sold Indian equity worth around Rs 7,624 crore in September alone, dragging Sensex lower by more than 2100 points or 3.5%.

FII outflows are among the key reasons triggering a fall in the Indian equity market.

FII ownership is now at multi-year low. “Persistent selling since mid-2021 (except for the past few weeks) implies that as a cohort, it has missed out on one of the best performing large equity markets in the world,” global brokerage Morgan Stanley said in a report.

Dollar index

The US Dollar Index which measures the greenback’s performance against the six major currencies remains on the back foot. Last seen, the index retreated a tad bit to 112 levels. Any surge in the dollar index is negative for Indian equities as it impacts FII flows.

Crude oil

Oil prices have tumbled sharply with Brent crude trading at around US$ 85 per barrel, any volatility in its prices will also impact Indian equities.

Global factors

Market participants will look up to the US Manufacturing PMI due to be released on October 3. Towards the weekend there will be also released the US initial jobless claims and unemployment rate data. Last week, the number of US citizens filing claims for unemployment benefits fell unexpectedly suggesting resilient labor market conditions.

Technical Outlook

“The Nifty ended the week down by more than 1%. It finished the week with a hammer candle, indicating that the short-term correction is likely over. The daily RSI is also starting to recover from 40 levels, signalling that the upward trend may resume soon,” said Apurva Sheth, Head of Market Perspectives, Samco Securities on the equities market outlook for this week.