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The Indian stock market ended lower for the fifth straight session last week as investors remained cautious amid rising crude oil prices, continued foreign investor selling and global uncertainty. Although the Sensex and Nifty recovered from sharp intraday losses, both indices still closed around 0.4% lower.
Here are the five major factors that could influence market sentiment this week.
1. US Federal Reserve policy meeting
Investors will closely watch the US Federal Reserve’s meeting on July 28-29 for signals on future interest rates.
The recent jump in crude oil prices to around $100 a barrel and tensions surrounding the Strait of Hormuz have raised fears of higher inflation. While the Fed is widely expected to keep interest rates unchanged, some market participants believe there is still a possibility of a rate hike.
The meeting will also be watched for comments from Fed Chair Kevin Warsh on inflation, interest rates and the central bank’s policy outlook.
2. Crude oil prices remain in focus
Oil prices climbed nearly 10% last week after fresh tensions between the US and Iran. The conflict intensified with continued military action, while Houthi rebels claimed attacks on Saudi oil tankers in the Red Sea and announced a naval blockade.
The rise in crude prices has increased concerns over global energy supplies and inflation. Higher oil prices are generally negative for India, which imports most of its crude oil.
3. Q1 earnings season gathers pace
Several major companies are scheduled to announce their June quarter earnings this week. These include Adani Enterprises, Adani Ports, Asian Paints, Dabur, Eicher Motors, Larsen & Toubro, Hindustan Unilever, Sun Pharma, Bharat Electronics, Canara Bank, Coal India, Tata Power, Tata Chemicals, Ambuja Cements and others.
Investors will closely monitor company earnings, management guidance and brokerage views to assess the outlook for different sectors.
4. FII and DII investment trends
Foreign institutional investors (FIIs) remained net sellers last week, selling shares worth Rs 7,180 crore. In contrast, domestic institutional investors (DIIs) continued to support the market by purchasing equities worth Rs 8,640 crore.
Market experts believe foreign investment is likely to remain volatile until geopolitical tensions ease and crude oil prices become more stable.
5. Rupee movement
The Indian rupee weakened for the fourth consecutive week, ending near Rs 96.55 against the US dollar. Rising crude oil prices, geopolitical concerns and strong demand for the dollar continued to put pressure on the domestic currency.
Analysts say the Rs 96.60-Rs 96.67 range remains a key resistance level. A move above this could weaken the rupee further towards Rs 97. On the other hand, if the rupee strengthens below Rs 96.50, it could recover towards the Rs 96.20-Rs 96.30 range.
Market outlook
Technical indicators continue to suggest weakness in the market. The indices are trading below important short- and long-term moving averages, while momentum indicators such as the Relative Strength Index (RSI) and MACD remain weak.
Analysts expect the 23,650-23,600 zone to act as an important support level. If this level is breached, the index could fall towards 23,450 and then 23,300. On the upside, the 23,950-24,000 range is expected to be a key resistance area.
