Foreign Fund Flows, Q2 Earnings And Inflation Data To Steer Stock Market Next Week

With the much-closely-watched US elections over, the Indian stock market's focus is set to return to domestic factors next week, such as foreign fund flows and the final phase of the Q2 earnings season.

In the week that went by, the markets continued to consolidate, losing over half a percentage point, signalling the continuation of a corrective phase. The week began cautiously due to concerns ahead of the US elections, followed by a brief mid-week recovery after the results.

However, the gains could not hold, leading the benchmark indices, Nifty and Sensex, to close lower at 24,148.20 and 79,486.32, respectively.

"With a key global event behind us, the market's focus will now return to domestic factors, such as foreign fund flows and the final phase of the earnings season," said Ajit Mishra - SVP, Research, Religare Broking Ltd.

"Indian markets have shown a pattern of reacting more to global risks while not fully participating in positive global momentum. For instance, despite U.S. markets rallying over 4.5 per cent after the election results, Indian indices failed to mirror that uptrend."

Next week, market participants will closely watch high-frequency economic data like IIP, inflation -- CPI and WPI.

According to VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services, the weakness in the Indian market can be attributed largely to the relentless selling by foreign institutional investors, which continues this month, too.

So far in November, FPIs sold stocks worth Rs 19,994 crore. In October, they sold Rs 94,017 crore, NSDL data showed.

"The rationale for the FII selling is, the elevated valuations in India which appear conspicuous in the context of the earnings deceleration evident in the Q2 numbers. The FII selling trend is likely to continue in the near term till data indicate the possibility of a trend reversal. If the Q3 results and leading indicators reflect a recovery in earnings, the scenario can change with FIIs reducing selling and even turning buyers," said Vijayakumar.

Deepak Jasani, Head of Retail Research at HDFC Securities, said the short-term trend of Nifty continues to be choppy, and this consolidation is likely to continue in the near term with a weak bias. (ANI)