From RBI policy to GDP data to FII flow: Here are 5 factors that will impact market this week

The Indian equity market ended higher for the second week, with Sensex and Nifty rising over 1% amid mixed cues. While the strong mandate for the BJP-led NDA in the Maharashtra assembly elections, easing global tensions and MSCI rebalancing injected positivity in the market, sustained selling by foreign institutional investors (FIIs) amid valuation concerns capped the upmove.  

On Friday, the S&P BSE Sensex closed 759 points higher at 79,803, and the NSE Nifty50 rose 217 points to 24,131, led by gains in index heavyweights RIL, Bharti Airtel, Sun Pharma, Cipla, M&M and Tata Consumer Products.

The cumulative market cap of BSE-listed companies rose to ₹446.68 lakh crore, while the combined market valuation of nine of the top-10 most valued firms surged ₹2,29,590 crore last week, with Life Insurance Corporation of India emerging as the biggest gainer. Reliance Industries remained the most valued domestic firm followed by TCS, HDFC Bank, Bharti Airtel, ICICI Bank, Infosys, State Bank of India, LIC, ITC and Hindustan Unilever.

"The market saw some relief after the recent consolidation, aided by an ease in geopolitical tensions, expectations of stability in government spending in H2FY25, and MSCI rebalancing. The rally was broad-based, while capex-linked sectors like infra, capital goods, and industrials outperformed in expectation of a surge in new order inflows. Brent crude declined by 4% during the week in anticipation of reduced tensions in the Middle East. An ease in oil prices will continue to aid operating metrics of Indian companies in the coming quarters,” says Vinod Nair, Head of Research, Geojit Financial Services.

“Stability in the market will depend on the steadiness of the incoming economic data next week. While the market is likely to witness some repercussions from the fall in Q2 FY25 GDP to 5.4%. On the other hand, investors will be more inclined to act on the upcoming RBI monetary policy…Other economic indicators like service and manufacturing PMI data, auto sales, and US job data will also influence investors’ attention and accordingly shape the market momentum,” he adds.

Here are 5 factors that will set tone for market next week:

GDP data shocker

The market will react to second quarter GDP numbers, which were released post market hours on Friday. The Q2 FY25 GDP growth slipped sharply to 5.4%, which was much lower than Street estimates of 7%, registering the slowest growth in 7 quarters. In the remaining second half of the current fiscal, the economy will have to grow at more than 8% to meet RBI’s estimates of 7.2%, which looks unachievable at this juncture. As a result, the central bank will have to cut its growth expectations for this fiscal.

“The high frequency data suggests that festive linked revival in activity may provide a marginally better H2 growth figure but overall GDP growth for FY25 is going to be around 100bps lower than RBI’s estimate of 7.2%. Despite the sharp slowdown in GDP growth we maintain our view of a pause by the RBI next week given elevated inflation and uncertain global environment,” says Upasna Bhardwaj, Chief Economist, Kotak Mahindra Bank.

FII flow

FIIs continued their selling spree in November, withdrawing around ₹26,000 crore this month after offloading ₹94,000 crore in October. “FIIs selling in November is lower than that of October. In October the total FIIs selling through stock exchanges was ₹1,13,858 crores. In November this had come down to ₹39,315 crores. This can be partly attributed to the reduced valuations caused by the correction in the market,” says Vijayakumar of Geojit.

He said that the recent FIIs activity was highly erratic in nature as they turned net buyers in the three days from November 23-25, while in the next two days they again turned massive sellers and sold equity worth ₹16,139 crore.

RBI MPC outcome

The central bank is widely expected to keep the repo rate unchanged at 6.5% in its final annual monetary policy committee (MPC) meeting. Given the uncertain geo-political scenario and a sharp uptick in inflation, RBI has little choice but to take a balanced growth approach. India's retail inflation climbed to a 14-month high of 6.21% in October mainly due to higher food prices, breaching the RBI's upper tolerance level, while wholesale inflation hit a 4-month high at 2.36% in October.

The six-member MPC, headed by RBI Governor Shaktikanta Das, will meet for three days—from December 4 to 6—and announce its policy decision on the final day at 10 AM. In the last meeting in October, the RBI kept the repo rate unchanged at 6.5% since February 2023, while unanimously changing the policy stance from ‘withdrawal of accommodation’ to ‘neutral’.

Domestic, global macro data

Investors will also keep a close eye on domestic as well as global macro data which will set tone for the market. Key macroeconomic data such as manufacturing and services PMI from India, the U.S., and China, along with U.S. jobs data and Fed Chair Jerome Powell’s speech, will influence market sentiment, says Santosh Meena, Head of Research, Swastika Investmart Ltd.

Among others, auto and mining companies will release their monthly sales and production data. On the global front, investors will keep a close eye on the movement of the dollar index and U.S. bond yields, which eased in recent days.

Technical outlook

On a daily chart, the Nifty has reclaimed the support of 21-Days exponential moving average (DEMA) and formed a green candle, which indicates strength. “On the upside, the index will find immediate hurdle near 24,350-24,360 levels. The 21-DEMA is placed near 24,080, which will act as immediate support for the index followed by 23,570, where the 200-Days exponential moving average (DEMA) support is placed. As long as the index persists below 24,360, traders should focus on booking profits on bounce and wait for fresh breakout,” says Hrishikesh Yedve, AVP Technical and Derivatives Research at Asit C. Mehta Investment Interrmediates.

Technically, not much has changed, says Rajesh Bhosale, Equity Technical Analyst, Angel One. “Observing the daily chart, Nifty continues to consolidate within a defined trading range. Given the weakness in the broader markets, Friday's low around 24600, which aligns with the 89 DEMA, is crucial. A break below this level could trigger a price correction and confirm a bearish breakdown of the head and shoulders pattern, potentially leading to a more severe decline in the near term. Conversely, previous support around 25000 has now become resistance, coinciding with the 50 DEMA, followed by 25250, which remains a significant hurdle.”

“The next directional move will likely occur once this range is broken on either side. Traders should monitor this situation closely and adjust their strategies accordingly. Additionally, being selective with stock-specific opportunities is vital, as we have seen significant sell-offs in individual counters,” adds Bhosale.