The Indian stock market is expected to witness choppy trade this week amid concerns about corporate earnings and the overall economic outlook, persistent fund outflows by foreign institutional investors, and rising crude prices. The swearing-in of U.S. President Donald Trump today will be keenly watched, especially his policies and comments on trade tariffs, which is expected to impact markets globally. Investors will also keep a close eye on Bank of Japan’s monetary policy slated to be announced on January 24.

Meanwhile, the equity benchmarks, Sensex and Nifty, are seen opening higher today, tracking firm cues from Asian peers and positive closing of Wall Street on Friday. The firm trend at Gift Nifty also indicates a gap-up start for the Indian equities, as Nifty futures were trading 51 points, or 0.22%, higher at 23,287.

On Friday, the Indian stock market closed lower, snapping three-session gaining streak, amid sell-off in IT and banking stocks. For the week, the equity benchmarks witnessed profit booking for the second consecutive week, with the Sensex and Nifty losing nearly 1% during this period. The market sentiment was dented by mixed earnings and sustained selling by foreign institutional investors in the backdrop of uncertainty around Trump administration’s foreign policies as well as rising crude oil prices (+5%) and continued depreciation of rupee against U.S. dollar (-0.6%) in the past week.

On January 17, the 30-share Sensex shed 403 points, or 0.52%, to settle at 76,640, and the Nifty50 declined 109 points, or 0.47%, to close at 23,203 level. The broader market outperformed, with the Nifty Midcap 100 and Smallcap 100 indices closing with gains of 0.20% and 0.16%, respectively.

Among the Nifty pack, 29 of the 50 constituent stocks closed in the positive terrain, with index heavyweight Reliance Industries, BPCL, Hindalco, Hindalco, and Coal India leading the gain. On the other hand, Infosys, Axis Bank, Shriram Finance, Kotak Mahindra Bank, and Wipro topped the losers chart.

Here are five factors that will affect market this week:

Q3 results

The market may continue to see stock specific reaction, with Q3 results of heavyweights such as of HDFC Bank, Paytm, Zomato, HUL, ICICI Bank, YES Bank, IndiGo, Ultratech Cement, Dr. Reddy's, and many others are lined up this week. As many as 250 companies are slated to unveil their December quarter earnings during this week.

Since most of IT companies such as TCS, Infosys, HCL Tech, Tech Mahindra and Wipro released their Q3 numbers, investors will shift focus to banking players as sectoral heavyweights such as HDFC Bank, ICICI Bank, YES Bank will disclose their results this week.

FII trend

Foreign institutional investors (FIIs) sold equities worth ₹25,218.60 crore last week, which was compensated by purchase of equities worth ₹25,151.27 crore by domestic institutional investors (DII). So far this month, FIIs pulled out ₹45,498 crore from Indian stock exchanges, while they invested ₹1,101 crore in the primary market. On the other hand, DIIs purchased equities worth ₹49,367.14 crore in January.

"The principal reasons for the sustained FII selling are the strength of the dollar and the rising bond yields in the US. With the dollar index above 109 and the 10-year US bond yield above 4.6%, it is logical for FIIs to sell in emerging markets, particularly in the most expensive emerging market India,” says V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.

Global cues

The trend in the global market is expected to set tone for the domestic bourses, especially Wall Street. On Friday, U.S. stocks closed higher, the last day of trading under U.S. President Joe Biden, ahead of Donald Trump inaugurated on Monday. The Dow Jones Industrial Average surged 0.78%, the S&P 500 advanced 1%, and the Nasdaq Composite zoomed 1.5%.

In the Asian market, stock exchanges in Japan, China, and Hong Kong started week on a solid note, following positive closing on Wall Street on Friday.  Japan’s Nikkei 225 gained 1.3%, China’s Shanghai Composite rose 0.6%, and Hong Kong’s Hang Seng jumped 1.9%. Among others, Australia’s ASX 200 added 0.3%, while South Korea’s KOSPI traded flat.

Donald Trump’s inauguration

The major trigger for the market this week will be inauguration of Donald Trump as the 47th President of the U.S. today, marking his return to the White House for the second time. As per market report, Trump may take aggressive trade policy decisions as he will join office.

“More than 100 executive presidential orders are reportedly in the works, aimed at addressing key policy priorities such as border security, deportations, and tariff hikes, signalling a bold and a rapid start to his new administration,” says Pravesh Gour of Swastika Investmart. 

IPO listings

Investors will also keep an eye on listing of Laxmi Dental on stock exchanges BSE and NSE on January 20. On the SME platform, five IPOs will make debut on either BSE SME or NSE SME. Among others, public issue of mainboard company Denta Water will open for subscription on January 22.

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