What are markets watching this week? Low activity in holiday-shortened week; focus on FII trends and

Looking ahead, analysts pointed out that while no major domestic events are scheduled, several global economic indicators will play a pivotal role in shaping market direction.

Stock market participants are expected to track global trends and the trading activity of foreign investors in a holiday-shortened week ahead, with no significant domestic triggers in sight, analysts said. The equity markets will remain closed on Wednesday for Christmas.

Looking ahead, analysts pointed out that while no major domestic events are scheduled, several global economic indicators will play a pivotal role in shaping market direction. Key factors to watch include US bond yields, the performance of the dollar index, and important data releases like initial jobless claims and new home sales.
Last week, the BSE benchmark tanked 4,091.53 points, or 4.98 per cent, while the Nifty slumped 1,180.8 points, or 4.76 per cent, reflecting the sharp impact of FII sell-offs.
 

FPI

Manoj Purohit, Partner and leader, FS Tax, Tax and Regulatory Services, BDO India said,”After a couple of months of continuing hefty burnouts, the capital markets have witnessed a comeback from the foreign fraternity this month. The feather in the cap is the record-breaking investments via the FDI route thereby crossing the USD one trillion mark.”

He added,”The return of foreign participants to the India market can be attributed to various factors. Primarily, on the macro front, the recent policy announcements in the US impacting the peer countries, settling geopolitical situations amongst middle east countries, the well-controlled inflation, and interest rate check.”

FII

Amid heightened volatility and persistent selling pressure from foreign institutional investors (FIIs), it is expected that a cautious approach will be adopted by investors. Despite recent market weakness, the outlook remains cautiously optimistic. However, the relentless selling by FIIs has added pressure to the market, influencing investor sentiment.

The movement of the rupee-dollar exchange rate and global oil prices, particularly the Brent crude benchmark, will also be critical in dictating the market’s direction.

V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services said,”The sudden change in FII strategy from buying to selling has impacted markets. In the early days of December FIIs were consistent buyers; they bought equity for Rs 14435 crores in the cash market till 13th December. But they have turned into big sellers after that. For the week ended 20th December FIIs have sold equity for Rs 15828 crores in the cash market, selling on all days”

It is expected that market activity will be lower due to the shortened week and the holiday season, according to Ajit Mishra, Senior Vice President of Research at Religare Broking. He noted that participants will closely monitor FII flow trends and global market performance for direction, while the expiry of December’s derivative contracts may amplify volatility.

Siddhartha Khemka, Head of Research at Motilal Oswal Financial Services, echoed a similar sentiment, noting that Indian markets are likely to remain subdued, closely tracking global cues in a volatile environment. With the festive season approaching and many global markets closed for 2-3 days, including a domestic holiday on December 25, market activity is expected to be light this week.