Indian stock markets rose sharply today, tracking gains in broader Asia and a fall in oil prices. BSE Sensex and the broader Nifty50 benchmark indices were up 1% each at 60,564 and 17,955, extending last week’s gains. For this month alone, the Sensex has risen over 3,000 points, on the back of strong corporate earnings reports and hopes of a less-hawkish stance from major central banks.
Oil prices fell today on concerns that widening COVID-19 curbs in China will curtail demand, while India, the world’s third-biggest importer of oil, benefits from a slide in prices as it brings down imported inflation.
This week, stock markets investors will be closely watching the outcome of policy meetings of the US Federal Reserve and the Bank of England. A surprise meet of the Reserve Bank of India (RBI) is also on the cards. The RBI has scheduled an additional meeting of its policy-setting committee for November 3 to potentially discuss its response to the government on its failure to stick to its inflation target for three quarters in a row.
Technically the stock market is poised to continue the ongoing rally aided by support from the mother market US where the Dow’s 828 point point rally last Friday recorded fourth straight week of gains. The driving force behind the ongoing rally is the strength of the US economy which is indicating a lower probability of an immediate US recession and, more importantly, indications that inflation is plateauing and might show a declining trend soon. This might enable the Fed to slightly moderate their hawkish stance. Already central banks of Canada and Australia have hiked rates below expectations. If this trend spreads, that will favour continuation of the rally in the short-term. The fact that FPIs have turned buyers during the last 2 days is another positive,” said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
On Friday, foreign institutional investors bought a net ₹1,569 crore worth of equities, while domestic investors sold ₹613 crore of shares, as per provisional data available with the National Stock Exchange.
Meanwhile, global data contradictions are galore. US GDP growth came in stronger than expectations (on the back of a stronger oil exports), even as DXY has weakened against the market perception of a slower than anticipated rate hike by Fed post November. A dovish ECB guidance, coupled with a dovish Bank of Canada rate hike confirms that such optimism of the markets may not be entirely unfounded,” said SBI Research in a note.
On the technical side, says Anand James – Chief Market Strategist at Geojit Financial Services, “Favoured view expects breach of 18,100 by Nifty and heading into the 18350-18600, but a direct rise above 18100 is sure to attract long liquidation pressure. Pivotal points that may be used as trailing stop-loss are now at 17470 and 17750 which are wide and that presents a risk if VIX were to rise from here. This is the key risk ahead.”
On other possible risk factors for markets, CR Forex Advisors said: “One of the biggest events- Fed monetary policy is due on Nov 2, where they will confirm the 4th 75 bps rate hike, but their tone for 2023 rate hikes will be in focus. Friday could be a furious one as the US will release its Job report and next week will be a real test for Joe Biden as he has to pass through the mid-term election smoothly. Lastly, US CPI and core CPI on 10th Nov could finally be a game changer for the market.”
Having these burdensome economic events, it is sure that “an episode of two-way volatility begins!” from here. So, tighten your seatbelt before a rollercoaster ride,” the forex advisory firm said.