Markets to track US, UK central banks’ meetings and India budget

This week, domestic equities are likely to continue with consolidation ahead of the United States Federal Reserve interest rate decision on Wednesday, where it is expected to maintain status quo and give some hint with regards to rate cut timelines.

The markets may also react to the interim budget, which Finance Minister Nirmala Sitharaman is set to present on Thursday.

Apart from this, the Bank of England monetary policy is also due, along with few key economic data releases which might keep markets range-bound. Euro zone Gross Domestic Product and inflation data along with US Consumer Confidence and Non-farm payroll data will be announced this week.

Further many heavyweights will be releasing their earnings, thus stock specific action would continue despite market consolidation. On Monday, markets will react to US GDP data and European Central Bank rate decision that got released late last Thursday.

Last week was truncated with just three trading days. Nifty continued witnessing profit booking on account of mixed set of earnings so far and some market news over Securities and Exchange Board of India’s new norms for Foreign Portfolio Investors. Nifty fell 219 points (-1%) to close at 21,353 levels. Broader market too saw selling pressure with Midcap 100 down 1.8% and Smallcap100 down -0.7%.

There was selling pressure after media reports that FPIs holding more than 50% in a single Indian corporate group will have to make additional disclosures. However, SEBI denied it. Foreign Institutional Investors have been mostly sellers in the month of January. Results too have been mixed so far which is not providing comfort.

Pharma was the only sector to gain, 1.7%, on the back of good results posted by Cipla. Cement companies also came out with robust numbers resulting in rally in cement stocks. All other sectors ended in red. Media lost 10% post Zee-Sony merger being called off. Realty lost almost 5% post weak results posted by Oberoi Realty. Weak results of Axis Bank and HDFC Bank led to fall in banking stocks.

Global cues were mostly positive amid good set of economic data points and healthy earnings released so far. However, rising hostilities in the Red Sea due to Houthi attacks poses a significant risk and could impact global economic growth on account of a prolonged spell of disruptions.

Further, central banks of Japan and China kept interest rates unchanged. Now all eyes would be on US Fed where the probability of rate cut in March has fallen. However, on the positive side, People’s Bank of China said it would cut the reserve requirement ratio for banks on February 5, which should provide boost to the economy.

(The writer is head of Retail Research, Motilal Oswal Financial Services Ltd)

FILE PHOTO: Federal Reserve Board Chair Jerome Powell departs a press conference at the Federal Reserve in Washington U.S. December 13 2023. REUTERS/File Photo

FILE PHOTO: A general view of the Bank of England in the City of London Britain September 25 2023. REUTERS/Hollie Adams/File Photo

FILE PHOTO: European Central Bank (ECB) President Christine Lagarde speaks to reporters following the Governing Council