All You Need to Know About Indian Stock Market Ahead of RBI MPC's Monetary Policy Meet Outcome

Key Highlights :

1. Indian equities witnessed a volatile week but persistent inflow of foreign capital into domestic equities supported the market.

2. Friday's closing values for the Sensex and the Nifty were both up by 0.19%.

3. Mid and smallcaps outperformed the benchmark indices significantly.

4. The BSE Midcap index hit its all-time high of 27,322.22 in intraday trade and ended 0.60% higher at 27,294.10.

5. The Smallcap index hit its 52-week high of 30,969.95 in intraday trade and closed 0.57% higher at 30,885.70.

6. The all-time high of the smallcap index is 31,304.44 which it hit on January 18, 2022.

7. The domestic indicators are favorable for bullish sentiment with the release of GDP data, and robust Q4 earnings.

8. The auto sales for May showed a sequential recovery, boosting sentiment across the sector.

9. Among the key sectors, energy, banking and IT traded under pressure however buoyancy in auto, FMCG and realty majors capped the damage.

10. The coming week June 5-9 is going to be an eventful one with several important data releases scheduled.

     Indian equities witnessed a volatile week but persistent inflow of foreign capital into domestic equities, inline earnings from India Inc supported the market amid mixed global cues during the week. The coming week June 5-9 is going to be an eventful one as we have RBI MPC’s monetary policy meet outcome scheduled on June 8. Before that, on the macroeconomic front, the OPEC+ meeting on June 4 and S&P Global Services PMI on June 5 will also be on participants’ radar for cues.

     The domestic indicators are favorable for bullish sentiment with the release of GDP data, and robust Q4 earnings. The auto sales for May showed a sequential recovery, boosting sentiment across the sector. Investors are anticipating the release of data points such as PMI and US payroll data, in addition to the outcome of the central banks' monetary policy meeting.

     Markets have been outperforming the majority of their global peers in recent weeks however further deterioration of the trend, especially in the US markets, might change the mood. At the same time, the lack of decisiveness in the banking pack around its record high is hurting the sentiment and its performance would play a critical role in the coming week.

     Considering the drop in CPI inflation along with the effects on GDP and GST kitty, we anticipate that the Monetary Policy Committee (MPC) will continue to hold the pause button. In its previous policy, the MPC clearly stated that its next move would depend on data, and the latest inflation numbers were within the target range. Furthermore, IMD has indicated a normal monsoon, despite some concerns about El Nino, which will provide support to the RBI. Liquidity above 1.00 lac crores is comfortable as evident from WACR remaining around 6.25%, so no concern arising for the same.

     The onset of the monsoon is also something to watch out for this week. In India, agriculture is heavily dependent on monsoon. Having said that, it is advisable to focus on sectors /stocks, which are holding well. On the index front, we expect Nifty to hold the 18,100-18,300 zone in case of any dip while a decisive close above 18,700 would pave the way for a new high.

     Overall, the coming week is going to be an eventful one with the outcome of RBI MPC's monetary policy meet, OPEC+ meeting and S&P Global Services PMI. It is important to keep an eye on the macroeconomic indicators and the performance of banking stocks in order to get a better understanding of the stock market. Investors should also define their investment approach and take the necessary steps to make informed decisions.

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