Global cues to set India’s equity indices

Investors will remain cautious over the possibility of any impending hike in US rates

Global cues such as caution ahead of a US interest-rate decision as well as developments surrounding international trade tensions are expected to determine the trajectory of major domestic equity indices.

“It’s expected that the market would continue to track each development related to the trade war, FOMC (the US Fed’s Federal Open Market Committee) interest rate meeting and actions of newly appointed RBI governor,” said SMC Investments and Advisors’ chairman and managing director D.K. Aggarwal.

Consequently, investors will remain cautious over the possibility of any impending hike in the US interest rates which can potentially drive away Foreign Portfolio Investors (FPIs) from emerging markets such as India.

Last week’s provisional data from exchanges showed that foreign institutional investors (FIIs) became net sellers, as they offloaded a total of Rs2,067.19 crore (Dh1.55 billion) worth of shares.

“Indices are likely to face renewed pressure after last week’s rally. US Fed’s interest rate decision is likely to be the key event driving the markets,” said Sahil Kapoor, chief market strategist, Edelweiss Investment Research.

“Domestic markets are now factoring in a looser monetary policy with the appointment of new RBI governor.”

The FOMC decision, along with volatility in crude oil prices are expected to impact the Indian rupee and in turn the broader market sentiment.

On a weekly basis, the rupee strengthened by 1.1 to 71.90 against the US dollar from its previous week’s close of 70.80. Expectations of lower interest rates and more liquidity infusion by the Reserve Bank of India (RBI) under its new chief, along with healthy macroeconomic data points buoyed investor sentiments, with the S&P (Bombay Stock Exchange) BSE Sensex gaining 0.81 per cent, to close at 35,962.93 for the week ended December 14, whereas the 50-share NSE Nifty advanced 1.04 per cent, to 10,805.45.