Domestic stock markets are poised to react on Monday to the outcomes of recent state elections in Maharashtra and Jharkhand, alongside key domestic macroeconomic data and trends in foreign institutional investor (FII) fund flows, according to market analysts.
The bi-monthly Monetary Policy Committee (MPC) meeting scheduled for early December is also expected to influence investor sentiment, as analysts anticipate a 25-basis-point rate cut amid concerns over slowing economic growth and moderating inflation.
The last trading session brought much-needed relief to investors after weeks of corrections. Despite a largely negative sentiment throughout the week due to persistent FII selling, Friday witnessed a sharp recovery driven by bargain hunting in index heavyweights, helping the Nifty and Sensex end near their highs. Both indices gained nearly 2 percent, closing at 23,907.20 and 79,117.10, respectively.
“Markets will initially react to the outcomes of the Maharashtra and Jharkhand elections. Additionally, macroeconomic indicators such as GDP and infrastructure output will garner significant attention. Participants are keeping a close watch on FII fund flows, given the ongoing selling spree,” said Ajit Mishra, Senior Vice President, Research, Religare Broking Ltd.
Manish Goel, Founder and MD of Equentis, noted that the upcoming MPC meeting from December 4-6 is generating significant interest. “Investors are cautiously optimistic about a 25-bps rate cut, which could help address concerns over slowing growth and inflation. However, the week ahead is likely to witness heightened volatility as markets navigate political uncertainties, economic data releases, and corporate developments,” he said.
Despite the recovery, market momentum remains uncertain. Joseph Thomas, Head of Research at Emkay Wealth Management, said, “The sharp rebound in the market this week is encouraging, but it remains to be seen how long this momentum can be sustained. Factors like the Russia-Ukraine conflict, the ongoing Middle East tensions, and the results of critical state elections could all have an impact in the coming week.”
Sectors such as real estate, auto, and FMCG led the rebound, while IT and banking were instrumental in capping losses and supporting the recovery. Broader indices also posted gains between 0.9 and 1.8 percent.
However, FIIs continued their selling spree, marking the third consecutive week of outflows in November. According to the National Stock Exchange (NSE), foreign investors sold equities worth ₹11,412 crore this week, taking the total net selling in November to ₹41,872 crore. Persistent outflows have added to market volatility and weighed on investor sentiment.
In contrast, domestic institutional investors (DIIs) provided critical support to the markets, purchasing equities worth ₹11,035 crore this week. Their total net buying for November stands at ₹37,559 crore, cushioning the impact of FII outflows.
Despite global and domestic challenges, analysts remain optimistic about India’s long-term growth potential. “India’s structural growth story remains intact despite short-term market fluctuations,” said Krishna Appala, Senior Research Analyst at Capitalmind Research.
(Inputs from ANI)
