The coming week is likely to be a volatile one for local equity markets due to the F&O Futures and Options expiry, which is scheduled to take place on November 24, 2022. Market participants will be looking for foreign exchange reserves data to be released on November 25 for further cues. Foreign exchange reserves in India decreased to $529.990 billion on November 4 from $531.080 billion in the previous week. The market participants will be closely watching the trend in investment by foreign institutional investors and the movement of the rupee against the dollar.
Markets will look forward to the developments in Europe and the statements from leading Fed officials about the future stance of the Federal ReservesFederal Reserves, according to Dr. Joseph Thomas, Head of Research at Emkay Wealth Management. Retail inflation numbers are too high for the comfort of central banks, especially in the US and India, even though price pressures have ebbed. He further stated that the prominent view is that probably inflation has peaked and that central banks might still hike rates but the quantum of hikes would be more moderate. Due to aggressive rate action in the last few months, there may be signs of sluggishness in growth. The markets would focus on the actual numbers to get a sense of the trajectory of inflation and official policy as well, Thomas said.
On the global front, investors are looking for a number of economic data from the world's largest economy, starting with the Chicago Fed National Activity Index on November 21, S&P Global Manufacturing PMI, S&P Global Composite PMI, New Home Sales, EIA Crude Oil Stocks Change, Baker Hughes Total Rig Count on November 21, and FOMC Minutes on November 24.
Vinod Nair, Head of Research at Geojit Financial Services, said the direction of the domestic market was largely driven by the trend of global peers during the week. Global markets were surging in the hope that the Fed will scale back its aggressive rate hike in response to easing U.S. inflation data. The euphoria was slowed by better U.S retail sales in October and aggressive remarks from Fed officials. Domestic CPI inflation has risen to 6.8% owing to declines in food and commodity prices, but it remains above the RBI's tolerance level. The CPI is expected to fall within the range of Q 1 FY 24. Domestic markets and premium valuation are negative, but the domestic market trades with caution, as are favourable domestic macroeconomic indicators and FII inflows. The domestic market is expected to focus on global trends in the absence of major domestic triggers. The current market scenario is a balanced approach with equity debt, 60: 40 for an average risk-averse investor, as interest yields are becoming attractive and the economy is slowing, Nair said.