In the short term, the stock market has shown some signs of recovery. Last week, bullish sentiment helped lift the indices slightly higher. However, in a broader six-month perspective, the market remains approximately 10% below its peak levels, indicating that a full recovery is still distant.
Key Events to Watch This Week
Impact of US Market Decline
On Friday 7 Feb 2025, the US markets experienced a sharp decline, with the Dow Jones falling over 1%. This could set a negative tone for the Indian markets on Monday, as global sentiment often influences domestic trends. Historically, Indian markets have followed US market movements 70-80% of the time, making this a crucial factor to monitor.
Inflation Data: India & US (February 12)
One of the most anticipated events this week is the release of inflation data from both India and the US on February 12. Inflation figures play a significant role in shaping market sentiment as they influence interest rate decisions and economic outlooks. However, with both countries releasing data on the same day, market reactions could be unpredictable and lead to volatility.
PM Modi’s Meeting with Donald Trump
A significant geopolitical event this week is the meeting between Prime Minister Narendra Modi and former US President Donald Trump. Trade-related discussions, including the possibility of reciprocal tariffs, are expected to be a major topic. Trump has previously hinted at imposing tariffs on multiple countries, including India, which could impact trade relations. This meeting may lead to key policy announcements that affect several industries, particularly automobiles, technology, and pharmaceuticals.
New Income Tax Bill: Potential Market Impact
The Indian government is expected to introduce a new Income Tax Bill in Parliament this week. The bill aims to simplify the tax structure and reduce the tax burden for individuals earning up to ₹50 lakh per year. While this reform could be beneficial in the long run, short-term uncertainty may impact investor sentiment, leading to cautious market movements.
IPO Market: Limited Upside Amid Weak Sentiment
Despite the current negative market sentiment, several Initial Public Offerings (IPOs) are set to launch this week. However, listing gains might be limited due to weak market confidence. Investors should carefully assess company fundamentals before subscribing to IPOs.
Delhi Election Results: Market Reaction
The Delhi election results have been declared, with the BJP securing a majority. Political stability is generally seen as a positive factor for the markets. However, the broader impact of the results will be observed in the coming sessions.
Other Important Market Factors
FII and DII Activity
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Foreign Institutional Investors (FIIs) have been net sellers recently, contributing to market weakness.
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Domestic Institutional Investors (DIIs) have attempted to offset this selling pressure, but their inflows have not been strong enough to drive a significant recovery.
Rupee Performance
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The Indian rupee remains under pressure, trading around 88 per US dollar.
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Any further depreciation could impact import-heavy sectors, particularly oil, electronics, and automobiles.
Crude Oil Prices
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Brent crude is currently trading around $75 per barrel.
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A sharp increase in oil prices could raise inflationary concerns and impact sectors such as aviation, transport, and FMCG.
Gold & Bitcoin Trends
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Gold remains a preferred safe-haven asset, attracting investors amid global economic uncertainties.
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Bitcoin, on the other hand, has struggled, falling below $10,000, indicating a decline in risk appetite for crypto investments.
