FII activity and the India-US trade deal are five key signals that could set the tone for D-St this week

Market movements throughout the week were largely driven by macroeconomic developments and changing global signals. On the domestic side, the rupee slid to a new low of 90.56 against the US dollar, weighing heavily on risk sentiment. However, some respite came after the US Federal Reserve announced a 25 basis point rate cut, while optimism over progress in India-US trade talks helped limit further downside.Auto retailing remained steady, with registrations up 2% year-on-year in November for passenger cars, three-wheelers, commercial vehicles and tractors. Meanwhile, revelations about public sector banks having written off Rs 6.15 lakh crore of loans in the last five and a half years kept the financial space in sharp focus.

Foreign institutional investors continued to reduce their holdings, maintaining pressure on domestic markets, while continued purchases by domestic institutional investors provided partial support and helped soften sharper declines. As a result, the Nifty fell 139 points to settle at 26,046, while the Sensex fell 445 points to close at 85,268.Key factors that could influence market movement as trading resumes this week:

1.Domestic dates calendar: The coming week will see an active domestic data calendar, with the release of India’s Wholesale Price Index (WPI) inflation and trade balance figures. Preliminary HSBC Composite, Manufacturing and Services PMI figures will also be closely watched for early signals on economic momentum heading into the end of the year.

2.India-US Trade Agreement: Developments related to trade negotiations between India and the US will also remain a focus.

3.Technical outlook: Nifty managed to regain the crucial short-term moving average (20 DEMA) near the 25,950 zone. Sustained holding above this level will be crucial to extend the recovery to the record high of 26,300, with further upside potential towards 26,550. “If this support is not maintained, it could lead to a retest of the previous swing low near 25,700, followed by the major support around 25,400, coinciding with the 100 DEMA,” said Ajit Mishra, SVP, Research at Religare Broking.

On the strategy front, he added: “Participants should remain selective and maintain a balanced approach amid ongoing currency volatility and mixed global signals. In addition, traders should avoid chasing stocks facing negative news flow in anticipation of a recovery and wait for clear signs of stability before taking on new exposure.”

4.Currency: USDINR is under pressure due to continued FPI outflows from both bonds and equities. With global interest rates rising, Indian bonds are facing stress due to the unwinding of carry trades in the USD and JPY.

“However, there are emerging positives around the India-US trade deal, which could provide occasional relief for the rupee. Overall, we expect a wide trading range of 89.50-91.00 on the ground,” said Anindya Banerjee, Head of Currency and Commodity, Kotak Securities.

5.FII activity: On Friday, foreign institutional investors (FIIs) posted net sales of Rs 396.26 crore in Indian equities, while domestic institutional investors (DIIs) were net buyers at Rs 2,828.21 crore.

(Disclaimer: Recommendations, suggestions, views and opinions expressed by the experts are their own. These do not represent the views of The Economic Times)