Global trends to guide stock markets this week: Analysts

Indian stock markets are expected to be driven mostly by global factors this week amid a lack of local triggers and earnings season largely coming to an end, say analysts.

Crude oil prices, rupee movement and US Federal Reserve meeting minutes to be released this week will also influence the market sentiment. The minutes of the US Federal Open Market Committee meeting held on January 31-February 1, will be released on February 22.

"With the earnings season behind us, global cues would largely dictate the trend in the coming week," Ajit Mishra, SVP - Technical Research, Religare Broking Ltd, said.

“Markets traded volatile in the continuation to the prevailing consolidation phase but managed to edge higher. The beginning was subdued, however, gradual recovery in the following sessions not only pared losses but also helped the index to close around the week’s high,” Mishra said.

Due to robust macroeconomic data, domestic markets concluded the previous week on a positive note, with the frontline indices gaining more than a per cent. Sensex settled at 72,426.64 and Nifty at 22,040.70.

The markets also got support from the macroeconomic data, including retail inflation which eased to a three-month low of 5.1 per cent in January mainly on account of lower food prices.

"Heavy buying in the banking sector helped broader indices inch towards new heights, countering the subdued beginning of the week characterised by concerns over elevated valuations and higher exchange margin requirements.

"The indices continued their resilient rally, unlike other Asian peers, buoyed by weaker-than-expected inflation data," Vinod Nair, Head of Research at Geojit Financial Services, said.

• Also read: Indian markets overvalued across most sectors, says Kotak report

Investor expectations of a rate cut from the Fed were bolstered as US retail sales declined. Moreover, a disinflation trend in the eurozone and expectations of increased consumption demand in China after the New Year holidays provided further support.

Looking ahead, a correction in PSU banks seems likely due to higher valuation risks. Meanwhile, sectors such as metals, FMCG, and capital goods are anticipated to gain momentum driven by robust construction demand, an order backlog, rural revival prospects, and India's narrowing trade deficit, Nair said.

Analysts said that in the coming week, the markets will be active due to new listings and initial public offers (IPOs), planned for the mainboard and SME segment. In the mainboard segment, Juniper Hotels IPO opens for subscription on February 21 and GPT Healthcare opens on February 22.

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