Stock Market Triggers: RBI Policy, F&O expiry, global cues to drive market next week; what should investors do?

Stock Market on Monday: The Indian market declined for the second week in a row. Benchmarks Nifty50 and Sensex closed with 1.2% and 1.3% cuts for the week ended September 23, 2022. However, in contrast to the loss of over one per cent by the barometer indices this week, FMCG index ended the week strongly with nearly four per cent gains. Nifty FMCG surged 3.8%, while the S&P BSE Fast Moving Consumer Goods ended higher by 3.7% in the week gone by.  

Among losers on the NSE, Nifty CPSE, Nifty PSE and Nifty Energy declined by 4.4 to 5.4% in the week concluding on September 23.  

Meanwhile, on Friday, the Nifty50 declined by 302.45 points or (1.72%) to settle at 17,327.35, while the 30-share BSE index saw a drop of 1020.80 points or (1.73%) to end at 58,098.92.  

It was the second consecutive week of decline for the Indian equity market, followed by a long period of outperformance, said Santosh Meena, Head of Research, Swastika Investmart Ltd 

We were decoupled from global markets for the last many days, but now we are witnessing some recoupling with global markets as the dollar index is at a multiyear high of 113 and the Rupee at a record low of 81, he said.  

"FII has also started selling in Indian equity markets, which is why we are seeing selling pressure in large-cap stocks. The 75-basis point hike with hawkish commentary by the US Fed spooked the sentiments of global markets. Global markets are fearing a recession in the US and Europe, while inflation is still a concern," Meena said on Friday's sharp correction.  

Stock Market Triggers for next week 

The market is likely to react to RBI policy, September future and Options expiry and global cues.  

Global cues are expected to dominate the coming week as well, but RBI policy, September F&O expiry will lead to volatility in our market, said Meena.  

"US GDP and unemployment numbers will be important. If we look at F&O data the short exposure of FIIs in the index future has jumped to 80%, which means sentiments are weak, but the market is hedged. We are heading into expiry weak on a weaker note as the Nifty slipped below the put base of 17500 where 17000 is the next base," he said.  

Nifty, Bank Nifty Outlook   

Technically, Nifty witnessed closing below 50-DMA with a breakdown of a bearish head and shoulder formation that may lead to further weakness, said Swastika Investmart Ltd Head of Research. On the downside, 17150 is an immediate support level, while 200-DMA of 17000 is a sacrosanct support level. On the upside, 20-DMA of 17700 is a critical hurdle, he said.  

On the 12-share banking index, the expert said the leader of the rally, BankNifty, witnessed the breakdown of up-sloping channel formation with closing below 20-DMA. "On the downside, 38750 will be the next important support level while 40250 will be the critical hurdle on the upside," he added. 

For the week ahead, investors will keenly watch the outcome of the RBI monetary policy on September 30th, said Vinod Nair, Head of Research at Geojit Financial services.  

There is a consensus that a 50bps rate hike will help strengthen INR. Benign oil prices and strong local demand may help the RBI to maintain the balance between growth and inflation, he said. 

What should investors do? 

India is in a better position with a decoupled economy with pickup in credit growth and tax collection, said Nair. However, rise in geopolitical risk and economic slowdown will affect India with a lag and weaken the performance in the short-term, he underlined. 

"We expect the market direction will be led by global developments and FIIs' action. On the valuation front, India is the most expensive stock market in the world today. Therefore, investors are advised to wait and watch until the dust settles," he added.