Market Outlook: Retail Inflation Data, Fed Meet To Dictate Equity Indices Trend

The forthcoming release of major macro-economic data points on industrial production (IIP) and retail inflation (CPI), and monetary policy announcements by Federal Reserve are likely to set the tone for the domestic equity indices including NSE's Nifty and BSE Sensex. According to market observers, other key factors such as Indian rupee's movements against the US dollar along with fluctuations in crude oil prices as well as developments on monsoon's progress are also expected to determine investors' risk-taking appetite.

"A negative surprise in inflation data would reinforce the hawkish stance of RBI. A weaker external sector data would have an impact on INR, especially during a negative EM (emerging markets) sentiment. IIP (Index of Industrial Production) would be watched closely for an ongoing economic expansion," Devendra Nevgi, founder and principal partner, Delta Global Partners.

Market Outlook This Week: Five Things To Know

1. Consumer Inflation, IIP Data: The Central Statistics Office (CSO) is scheduled to release the macro-economic data points of IIP and CPI (Consumer Price Index) on June 12. Subsequently, other major macro-economic data points such as WPI (Wholesale Price Index), current account deficit and balance of trade figures will be released.

2. US Fed statement: On the global front, monetary policy announcements by the US Federal Reserve, ECB (European Central Bank) and the Bank of Japan (BoJ) will comprise major themes for this week. "The US Fed rate move and language will set the tone for sentiment in EM as well Indian markets. The key is whether the US Fed pays attention to the vulnerable EM situation," Nevgi said.

3. Rupee Vs US Dollar movement: The movement of Indian rupee against the US dollar and fluctuations in global crude oil prices will also set the course for the key indices. On a weekly basis, the Indian rupee weakened by 45 paise to close at 67.51 against the US dollar from its previous close of 67.06 per greenback.

4. Foreign institutional investors (FIIs): In terms of investments, provisional figures from the stock exchanges showed that foreign institutional investors (FIIs) bought scrips worth Rs 1,367.22 crore during the week ended June 8. Figures from the National Securities Depository Ltd (NSDL) revealed that foreign portfolio investors (FPIs) invested equities worth Rs 3,757.94 crore, or $560.40 million, in the last week.

5. Intermediate trend: Additionally, technical charts show that the National Stock Exchange (NSE)'s Nifty50 remains in an intermediate uptrend. "Technically, with Nifty recovering from the lows of 10,552 points, the intermediate trend remains up," said Deepak Jasani, Head of Retail Research, HDFC Securities. "Further upsides are likely in the coming week once the immediate resistances of 10,814 points are taken out. Crucial supports to watch for any weakness are at 10,618 points."

Last week, the key Indian equity indices -- the S&P BSE Sensex and the NSE Nifty50 -- rose on the back of Reserve Bank of India's "neutral" stance on a future rate hike trajectory, along with its reform measures for the realty, bond and banking sectors and value buying.