IIP, inflation, rupee to drive equity markets this week

Macroeconomic data, movement of the rupee and trend in global crude oil prices would be crucial for the stock markets this week, say experts. 

After back-to-back hikes since June, the Reserve Bank of India (RBI) kept interest rates unchanged Friday, surprising markets that had expected a rate hike to support the tumbling rupee and combat inflationary pressures from high oil prices.

"The equity market outlook has taken a beating given degradation in the quality of debt, redemption and heightened risk averseness by investors. 

"Trend is likely to be negative at least in the near-term till the financial market stabilises. Key data like bond yield, INR, oil prices, liquidity and equity valuation has to normalise which may take some more time," said Vinod Nair, Head of Research, Geojit Financial Services. 

"The lingering concerns seems to be around crude oil prices, global interest rates and the ongoing global developments on the trade front. Given the status quo, we expect short term rates to ease while long term yields may trade range bound. 

"The macro needs monitoring and INR and crude oil prices could be leading the way for markets going forward," said Lakshmi Iyer, CIO (Debt) and Head of Products, Kotak Mahindra Asset Management Company. 

Stock markets took a beating last week over rupee woes and crude oil prices. The BSE Sensex lost a whopping 1,850.15 points over the week to close at 34,376.99 on Friday.

"On economic data front, this week the International Monetary Fund will present its latest World Economic Outlook as it opens its annual meeting with the World Bank in Bali, Indonesia. US September inflation data is due on Thursday. 

"In India, data like IIP for August and CPI for September month will be announced this Friday," said V K Sharma, Head PCG and Capital Market Strategy, HDFC Securities. 

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"Markets have witnessed selling across the board. Even the good quality stocks were battered in line with general markets. 

"However, the current fall was in isolation with global developed markets which give a ray of hope that soon a bounce will emerge as valuations have corrected a lot across the board. We think markets will calm down once corporate results start pouring in and given the oversold state of market, sharp rallies can be expected," said Jimeet Modi, Founder and CEO, SAMCO Securities and StockNote.

The Indian rupee crashed below the 74-level against the US dollar for the first time ever Friday. 

"Rupee was caught off guard and weakened beyond 74, after RBI surprised markets by keeping rates unchanged. Given the rising oil and trade tensions, traders will bet on exports going up, to curb further weakening in the currency," said Anand James, Chief Market Strategist, Geojit Financial Services.