This week’s Markets may be influenced by Inflation Statistics and the Fed Meeting

Indian equity markets posted their first weekly losses in a month due to rising crude oil prices and global monetary policy tightening fears.

The past week was tumultuous for stock markets as the Reserve Bank of India issued a 50-basis-point rate hike and hinted at even tighter financial conditions ahead.

Foreign portfolio investors sold domestic stocks relentlessly, dragging down the main indexes by 2.6% and 2.3%, respectively.

Foreigners believe Indian markets are overvalued due to growing inflation and global interest rates, thus they sell every day, according to HDFC Securities’ Head of Retail Research Deepak Jasani.

Market gains aren’t sustainable. FPIs or local vendors sell them. These two reasons cause markets to fall.

NSDL data shows FPIs sold Rs 13,888 crore in stocks in June.

BSE Midcap and Smallcap indexes lost 1.2% and 2%, respectively.

Nifty Bank fell 2.2% while IT fell 2.6%. Metals fell 2.4% and Nifty Realty 1.6%. The Nifty Oil and Gas index gained 0.4% for the week, mainly due to rising oil prices.

Rupee weakness damaged shares last week, exacerbating FII outflow concerns. A weaker rupee reduces FIIs’ stock returns. Friday’s intraday low for the rupee was 77.8750/$1.

“Rupee hit a fresh all-time low, but in the recent few sessions it has been very resilient and is stabilizing in a small range despite volatility in local and global markets and strength in the dollar against its key crosses,” said Motilal Oswal Financial Services’ Gaurang Somaiya.

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Next week’s markets may be influenced by six variables.

US inflation

Friday after Indian business hours, data revealed US consumer inflation climbed to 8.6% in May. Inflation in May exceeded market forecasts, putting pressure on the Fed to keep hiking rates despite risks to economic growth.

The Dow Jones fell 880 points or 2.7% in response to the data. The S&P 500 lost 2.9% and the Nasdaq 3.5%.

Monday, US market turmoil could spread to Asian and Indian stocks.

Inflation Domestically

Monday at 5:30 pm IST, India’s Central Statistics Office will issue May CPI-based inflation figures.

Reuters predicts May retail inflation of 7.10%. May’s figure is lower than April’s 8-year high of 7.79%, but it’s still significantly above the RBI’s mandated range of 2.06%.

The central bank is expected to continue raising interest rates and tightening liquidity, increasing company capital costs.

Last Monday, the RBI raised the repo rate by 50 basis points to 4.90 percent, bringing the total rate hikes in the last month to 90.

Fed Announcement

After a two-day FOMC meeting, the Fed will announce its next monetary policy statement on June 15.

Given surging US inflation, the FOMC is projected to raise rates by 50 basis points in June and July.

Rising US interest rates and bond yields enhance the danger of greater outside outflows from Indian assets, as returns on financial assets in the world’s largest economy become more appealing.

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As in recent months, global crude oil prices will affect domestic stock prices next week.

Crude oil prices have risen again after the EU banned a large portion of Russian oil imports and Saudi Arabia raised pricing for Asian importers.

Friday’s Brent crude price was $122, near a three-month high.

The bottlenecks in global supply networks caused by Russia’s invasion of Ukraine pushed India’s crude oil basket to a 10-year high on Friday.

High oil prices increase India’s trade deficit because the country imports more than 85% of its fuel.

India relies heavily on imports for its energy needs, making it one of the top demanders of petroleum products. Six weeks ago, crude rose.

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FPI equities sales may weigh on indexes next week. With US inflation figures surprising to the upside, global investors may reduce Indian equity exposure in expectation of Fed rate hikes.

Higher US interest rates and a stronger dollar reduce the attraction of assets in riskier emerging economies like India. The rupee has weakened 4.5% against the dollar so far in 2022 due to the dollar’s rise.

A weakening currency reduces FPIs’ Indian asset Returns

FPIs have liquidated $1.81 trillion worth of Indian stocks so far in 2022. Since October 2021, sales have totaled Rs 2.2 lakh crore.


The Nifty lost ground last week along with global markets, and the benchmark is approaching a support zone between 15,900 and 16,100. Yesha Shah, Samco Securities’ equity research head.

Despite this week’s trading patterns suggesting more downside, negative momentum has eased as Nifty trades above falling resistance. If Nifty stays above 15,900, it might reach 16,800. We urge traders stay neutral this week and avoid aggressive trades.

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