Fed decision, inflation may drive markets in coming week: Analysts

The US Fed interest rate decision, domestic inflation data, crude oil prices and developments in West Asia would be the major drivers for stock market movement in a holiday-shortened week ahead, analysts said.

Equity markets would remain closed on Monday for Ganesh Chaturthi.

“Globally, developments in the US-Iran conflict and movement in Brent crude will remain critical market drivers. This week will be dominated by the US Federal Reserve’s monetary policy decision and commentary on the future path of interest rates,” Ajit Mishra, SVP of Research at Religare Broking, said.

On the domestic front, August WPI and CPI inflation data, followed by unemployment and balance of trade data, will remain in focus, he said.

“The immediate focus will be on US inflation and the Federal Reserve’s policy decision. The September 11 inflation report showed headline CPI rising 0.4 per cent month-on-month and holding at 3.4 per cent annually, while core inflation increased 0.3 per cent from the previous month but eased to 2.4 per cent year-on-year. The firmer monthly reading keeps inflation risks in focus and could reinforce pressure on global bond yields and the dollar, particularly if the Federal Reserve adopts a more hawkish tone,” Hariselvan Radhakrishnan, Founder & CEO of HST Wealth, a Research Analyst firm, said.
The September 15-16 FOMC (Federal Open Market Committee) meeting will therefore be the week’s principal global catalyst, he said.

For India, crude oil remains the most immediate external risk, he said, adding that any renewed rise in crude, particularly if disruptions to Middle East oil flows intensify, could add to inflationary pressures, widen the import bill, weigh on the rupee and squeeze corporate margins.
“Domestic data, including WPI inflation and trade figures, will provide additional clues on how much of that pressure is filtering into the economy,” Radhakrishnan added.
Last week, the BSE benchmark Sensex tumbled 1,733.67 points, or 2.26 per cent, and the NSE Nifty declined 499.6 points, or 2 per cent.

“Global macroeconomic and geopolitical risks are likely to keep Indian equities on edge in the week ahead, with crude oil prices, developments in the Middle East and shifting expectations for US monetary policy emerging as the key drivers of market sentiment,” Ponmudi R, CEO - Enrich Money, an online trading and wealth tech firm, said.
Markets remained under significant pressure during the last week, with the Nifty-50 extending its weekly losing streak to five consecutive weeks, as escalating tensions in the Middle East triggered a sharp rise in crude oil prices and intensified concerns over inflation, global interest rates and economic growth.