US Fed Meet, Inflation, Oil Prices, Other Factors to Watch Out For

Stock market this week: The market snapped a three-week winning streak and fell more than 2 percent in the week to June 10 as inflation risks, growth concerns, higher oil prices and an IFI sell-off weighed on sentiment. Friday’s trade was pathetic as the BSE Sensex lost more than 1,000 pips in a single day. Heavy selling in IT and banking shares caused the BSE benchmark Sensex to break 1016.84 points to close at 5,4303.44. Its broader counterpart Nifty 50 settled by 276.30 points, or 1.68 percent, at 16,201.80. The index recorded its worst week in a month.

The past week has been volatile for stock markets, with the Reserve Bank of India announcing a 50bps rate hike and clearly hinting that tighter financial conditions will continue, given rising domestic inflation.

Experts expect volatility to remain high this week as well, with the market responding first on Monday to US inflation data that came in at a 40-year high and industrial production data for April, both released later on Friday. “Markets are once again reeling under tremendous pressure worldwide due to viscous inflation which could prompt swift action by major banks in the future. Indications are that the prevailing negativity will persist, however, bargain-hunting in select heavyweight indices could limit of damage,” said Ajit Mishra, Vice President of Research at Religare Broking.

Here are the main factors that will affect Dalal Street this week

US inflation data

Data released after Indian trading hours on Friday showed that US consumer inflation rose to a forty-year high of 8.6 percent in May. With inflation rising in May that exceeded market expectations, pressure is mounting on the Federal Reserve to continue raising interest rates, despite the risks to economic growth.

In response to the data, US stock markets fell on Friday, with the Dow Jones down 880 points, or 2.7 percent. The S&P 500 fell 2.9 percent, while the technology-heavy Nasdaq index collapsed 3.5 percent.

Domestic Inflation Data

CPI inflation remains a major factor to watch out for especially after the Reserve Bank of India raised its full-year forecast for FY23 by 100 basis points to 6.7 percent, well above the target range of 4 percent (+/- 2) percent. ). The central bank has factored in the price of crude oil at $105 per barrel, the tense global geopolitical situation and the hope of a normal monsoon among other things for the inflation outlook.

CPI inflation data will be released on June 13th and CPI inflation data will be released on June 14th. Market participants will be analyzing with interest whether import duties restrictions and interest rate hikes have had a positive effect on the inflation figure.

US Federal Reserve result

The US Federal Reserve will release its next monetary policy statement on June 15, after a two-day meeting of the Federal Open Market Committee.

The Federal Open Market Committee, which has already raised the benchmark interest rate by a cumulative 75 basis points since March 2015, is expected to raise rates by 50 basis points in both June and July, given rising inflation in the US.

oil when boiling

Crude oil prices remained near and above $120 per barrel last week, well above the $105 per barrel assumption made by the Reserve Bank of India for full-year inflation forecasts. This is a critical factor for India as it is a net importer of oil, and so this may be one of the factors restricting the upside in stock markets for several months now.

Experts said the fear of recession and lockdown in China to curb the Covid crisis may affect oil prices to some extent, but the supply shortage largely amid geopolitical tensions may keep oil prices high in the coming days.

Brent crude futures closed at $122.01 a barrel, up 1.9 percent above $119.72 a barrel on a weekly basis.

Sell ​​FII

Continued selling by fisheries firms in emerging markets, including India, given the negative sentiment around the world due to rising inflation concerns amid geopolitical tensions and faster policy tightening by central banks. Hence, the factor is expected to continue to limit the upside in stock markets, experts said.

FIIs were net sellers for the eighth consecutive month, netting over Rs 3.45 crore since October 2021 as against Rs 2.63 crore net buying by local institutional investors in the same period.

In the past week, manufacturing firms netted Rs.12,662 crore of shares, while DII was able to offset the outflow largely by buying Rs.9,611 crore of shares in the same period.

elegant artistic look

Yesha Shah, Head of Equity Research, Samco Securities, said Nifty posted losses last week in line with global markets, and the benchmark index appears to be heading towards a support area between 15900 and 16100.

“Despite the fact that this week’s trading patterns indicate an additional downtrend, the overall bearish momentum has moderated as Nifty is currently trading above the descending resistance line. As long as Nifty is at least 15900, there is a high chance of testing 16800 levels. We recommend traders Maintaining a neutral view of the week ahead and avoiding aggressive deals on either side.”

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