Market Outlook For Next Week: RBI Policy, Auto Nos, Global Cues To Dictate Trend

Domestic indices ended the week on an optimistic note led by a rally in global stocks and FIIs turning net buyers. Sharp decline in the India VIX from recent high of 17 zones to 12.8 levels, too supported the markets. The Sensex and the Nifty ended the week with gains.

Going ahead, markets are likely to take cues from the RBI policy, auto numbers and of course global trends. According to Siddhartha Khemka, Head - Retail Research, Motilal Oswal Financial Services Ltd, valuation has come off substantially from 24x 1-year forward P/E in Oct'21 to 17x currently (v/s 20x long period average), offering moderate margin of safety.

"In the near term, focus will now remain on RBI's policy meeting next week, where 25-bps rate hike is expected in line with the hikes done by major global central banks. Apart from this, markets will also react to monthly Auto sales number data that will be released over the weekend," he stated.

According to Dr. Joseph Thomas, Head of Research, Emkay Wealth Management, markets would remain more data dependent going forward.

"The improving sentiments in the developed markets, especially USA, was reflected on the domestic equity markets. The rising expectations of a contained banking crisis without any contagion, coupled with higher jobless claims led to markets betting on Fed going slow on the rate hikes front. The markets seem to be discounting some of the positives, the market movement going ahead may be more data dependent and look at validation of the expectations," he says.

Overall, it looks like the momentum would be sustained, given the massive cash holdings that mutual funds have. Every fall in the markets, would be bought into by mutual funds, which is what they have been doing in the last several months. Should selling from FIIs ease, the markets could very well rally.