After a bullish wave at the start of December, the market started tanking from the last week as recessionary pressure started mounting, which led to a sell-off in IT stocks. Also, RBI's hawkish monetary stance and weak global cues dragged down the market even more.
On Monday, the Indian equity market kicked off lower as global cues continued to worry investors' sentiments worldwide. The BSE Sensex opened at 61,770 and almost fell 500 points in the early hour of trading, but it regained some of the lost ground and currently trading between the range of 62,100 to 62,300, while Nifty-50 opened at 18,402 and dipped 100 points in the early hour but it also trimmed the losses and it is currently trading close to 18,500 mark.
After choppy trading in the early hour, both the indices are trading mildly in red as investors await the crucial global and domestic cues which will shape the market in the near term.
What are these cues?
India's CPI (Consumer Price Index)
The Ministry of Statistics and Programme Implementation will release retail inflation data for the month of November by today evening (12th December). Various projections show that inflation is expected to soften for the month of November at 6.4% from 6.77% in October.
If the inflation forecast is correct, it will boost investors' sentiments in the near term as it would indicate that RBI's aggressive rate hikes are working on taming inflation and the future rate hikes will be less hawkish.
However, one should remember that inflation is still hovering above the RBI's upper tolerance band of 6% for almost a year and is exhibiting the sign of stickiness. In the words of Shaktikanta Das, RBI will keep Arjuna's eye on the evolving inflation dynamics.
Fed's Federal Open Market Committee (FOMC) outcome
Federal Open Market Committee (FOMC), which met today, will announce its critical monetary policy decisions on 14th December. The financial market is wildly expecting a 50-bps rate hike after four consecutive 75-bps rate hikes by Fed; however, the key policy decisions will be ultimately shaped by the US's inflation data for November, which is scheduled to be released tomorrow (13th December).
Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said, "If the US CPI data confirms a declining trend, the Fed can reaffirm its earlier comment of slowing down rate hikes, which will be interpreted by the market as a departure from the hawkish stance. On the contrary, if the CPI data reflects stubborn inflation, the Fed will have no alternative but to remain hawkish. This will be negative for equity markets."
Apart from the policy outcome of the Fed and India's and the US's inflation data, the investors also await October's industrial production (IIP) data set to be released in the evening.
(With inputs from IANS)
