After surging more than 1% during the holiday-shortened Diwali week, the domestic benchmark indices - the BSE Sensex and the NSE Nifty - are likely to witness cautious trade this week ahead of another rate hike possibility from the U.S. Federal Reserve in their upcoming policy announcement on November 2. Besides, the Reserve Bank of India (RBI) is also scheduled to hold an additional Monetary Policy Committee (MPC) meeting on November 3 amid failed effort to contain the consumer price index (CPI) inflation target within the 2-6% band for the first nine months of the current calendar year - January to September 2022. Investors will also keep a close eye on foreign fund flows, while macroeconomic data points such as manufacturing and services PMI data will be eagerly anticipated.

During the week ended October 28, the BSE Sensex climbed 653 points, or 1.1%, to settle at 59,960 levels, while the broader NSE Nifty rose 210 points, or 1.2%, to end at 17,787 as recovery in U.S. GDP growth and fall in crude prices eased recession concerns. Besides, the recovery in the rupee against the U.S. dollar and fund inflows by foreign portfolio investors also lifted the equity market. Among sectors, the BSE Auto index was the best performer with a 3.9% gain, followed by the BSE Oil & Gas index which surged 3.3% during the week. Among individual stocks, Maruti Suzuki India topped the chart with 9% gain, followed by JSW Steel, NTPC, Larsen & Toubro, and Power Grid Corporation of India, which rose between 4.5-7%.

Going ahead, here are five factors that will impact the market this week:

U.S. Fed meeting

The U.S. central bank is widely expected to raise interest rate hike by up to 75 basis points (bps) for the fourth consecutive month as better-than-expected third-quarter GDP data provided the Federal Reserve headroom to maintain its ultra-hawkish policy stance. Investors will also keep a close ear on the Fed Chair speech for more clarity regarding policy tightening in December.  

In the last policy meeting in September, the Fed raised interest rates by 75 bps for the third straight time to curb inflation. The central bank expects the rate to reach 4.6% in 2023, the highest level last seen in the 1980s.

RBI additional MPC meeting

The Reserve Bank of India (RBI) will hold an additional meeting of its monetary policy committee (MPC) on November 3. The MPC is reportedly expected to discuss a report to be submitted to the government explaining why the central bank failed to maintain the consumer price index (CPI) inflation target within the 2-6% band during the first three quarters of the calendar year 2022.

The additional meeting of the rate-setting panel comes at a time when the central bank expects headline inflation to ease from its September high, albeit stubbornly, on the back of easing momentum and favourable base effects. India’s retail inflation rate jumped to 7.4% in September from 7% in the month of August and 6.71% in July on the back of the high food prices in the country.

In the ongoing fiscal so far, the RBI has raised the repo rate, the rate at which it loans money to banks, by a cumulative 1.9% – 40 basis points in an off-cycle meeting in May, 50 bps in June and 50 bps in August and 50 bps in September.

Macroeconomic data

On the domestic front, a slew of macroeconomic pointers will be released this week which may set the tone for the market. The fiscal deficit data and monthly GST numbers will be out on October 31, while Manufacturing PMI and Balance of Trade (preliminary) data will be released on November 1. The Services PMI will be announced on November 3.

Sectorally, auto and cement stocks will be releasing their monthly sales numbers during this week ending November 4. Besides, mining and steel companies will also unveil their monthly production figures. 

Foreign fund flows

Foreign portfolio investors (FPIs) have withdrawn funds worth ₹ 1,586 crore from the Indian equity market in October, emerging as net sellers for the second straight month amid uncertainty about global economic growth and tightening of monetary policy by central banks across the world. The weakness in the rupee against the U.S. dollar also led to foreign fund outflows.

However, the volume of fund outflows was much lower than the previous month as FPIs sold ₹ 7,624 crore worth of equities in September. Overall, they have sold ₹1.7 lakh crore worth of stocks so far in 2022.

Corporate earnings

The market is expected to witness stock price movement based on corporate earnings. Some of the major players which are slated to release their September quarter earnings this week include Bharti Airtel, Castrol India, Larsen and Toubro, Tata Steel, Adani Ports, LIC Housing Finance, Sun Pharma, Tata Investment, and Tech Mahindra.

Among others, Adani Transmission, Mahindra and Mahindra Financial Services, Relaxo, Gati, Adani Enterprises, Ajanata Pharma, Bank of India, Blue Star, HDFC, HPCL, Vodafone Idea, Britannia, Cipla, Interglobe Aviation, Titan, TVS Motor, Bank of Baroda, Power Grid, and SBI will also unveil their quarterly earnings this week.

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