Will D-Street cheer Delhi election results? Key factors to impact share market this week

The Indian stock market is expected to see volatility this week amid global factors such as escalated trade war tensions and soft U.S. macro data. On the domestic front, investors will closely monitor retail and wholesale inflation data, key metrics used by the Reserve Bank of India (RBI) to take a call on monetary policies. This week, manufacturing PMI and Index of Industrial Production (IIP) data will also be released, which are used to gauge the health of the overall economy. Among others, foreign fund flows, crude prices, and rupee movement will be key triggers for the market.

Domestic bourses to open flat today

The domestic bourses are seen starting the week on a flat-to-lower note on Monday, in sync with Asian peers, amid looming fear of a global trade war after U.S. President Donald Trump threatened that he would announce reciprocal tariffs on many countries this week. The weak trends at Gift Nifty also indicate a muted start for Sensex and Nifty, with Gift Nifty futures trading 15 points, or 0.06%, lower at 23,566 mark.

However, the victory of Prime Minister Narendra Modi-led BJP in the Delhi assembly elections may impact the market positively. After a long gap of 26 years, the BJP is set to come back to power in Delhi after winning 48 out of 70 assembly seats, sweeping the incumbent Aam Aadmi Party (AAP), which was in power for the previous ten years. The Delhi Legislative Assembly elections were held in Delhi on 5 February 2025, and counting took place on February 8.

Sensex, Nifty extend weekly gains

Last week, domestic equity benchmarks extended their gaining momentum for the period ended February 3-7, with the BSE Sensex and NSE Nifty rising 0.46% and 0.33%, respectively. The bourses settled with margin gains amidst persistent volatility throughout the week caused by the Union Budget 2025, U.S. trade tariff announcements, followed by the Reserve Bank of India (RBI) monetary policy outcome on the last day of trading.

On Friday, the 30-share Sensex ended 198 points lower at 77,860, and the Nifty50 closed the day at 23,560, down 43 points. The Dalal Street settled lower in choppy trade even after the RBI cut interest rate by 25 basis points (bps) for the first time in six years. The rate cut was discounted by the market as it was widely in line with Street expectations, a logical progression following the shift to a neutral policy stance in October 2024 and the Cash Reserve Ratio (CRR) reduction in December 2024.

U.S. stocks end lower on trade war escalation, weak jobs data

On Friday, Wall Street ended in red as sentiment was spooked by growing concerns about trade war along with weak jobs and consumer sentiment data. Investors turned jittery after President Donald Trump said he would announce reciprocal tariffs on many countries next week. The Dow Jones Industrial Average fell 1%, the S&P 500 dropped 0.9%, and the Nasdaq Composite settled 1.4% lower.

On the macro front, the U.S. job report showed that the labour department added fewer jobs than expected in January after robust gains in the prior two months. Total U.S. nonfarm payrolls rose by 143,000 jobs last month, significantly lower than the revised 307,000 figure in December. Another data on the U.S. consumer sentiment by the University of Michigan showed that it fell unexpectedly to a seven-month low of 67.8 in February, down from 71.1 in the prior month and the lowest reading since July. The University’s survey on inflation expectations projected it to rising to 4.3% in February - the highest since November 2023 - from 3.3% in the prior month.

Asian stocks open mixed amid tariff worries

Equity markets in the Asia-Pacific region opened mixed today as investors seemed concerned that U.S. President Donald Trump will announce reciprocal tariffs this week. Beyond anticipated developments on the tariff front, investors also weighed rising U.S. bond yields, with markets in Japan, Taiwan, and Indonesia falling in the range of 0.1%-1%. On the other hand, markets in China, Hong Kong, and Singapore rallied between 0.5% to 1.5%.

D-Street to see 9 new IPOs, 6 listings this week

In the primary market, as many as nine initial public offerings (IPOs), including three mainboards, will open for subscription this week, while shares of six SMEs will debut on BSE SME and NSE SME platforms. In the mainboard segment, Ajax Engineering IPO, Hexaware Technologies IPO, and Quality Power IPO will hit D-Street.

FIIs outflow continue

Foreign institutional investors (FIIs) continue to remain net sellers in the Indian equity market amid valuation concerns, muted corporate earnings, and slowing economic growth. In the cash market, they sold equities worth ₹8,852 crore last week. However, the equity market received continued support from domestic institutional investors (DII) as they poured ₹6,449 crore in the cash market last week, providing stability to the market.

FPI flows to date in Feb’25 was negative for all key emerging markets (except the Philippines and Thailand), says Shrikant Chouhan, Head Equity Research, Kotak Securities. Brazil, Indonesia, Malaysia, South Korea, Taiwan, and Vietnam, witnessed outflows of $430 million, $106 mn, $202 mn, $59 mn, $41 mn, $1,422 mn, and $125 mn, respectively. The Philippines and Thailand witnessed inflows of $21 mn and $43 mn, respectively.

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