RBI's MPC meet, Gujarat poll results to drive markets

In the week ahead, Nifty might consolidate for the next few days given a few key events lined up over the fortnight. However, the overall trend remains positive with Nifty headed towards 19,000 ones, although the pace of gains may slow down.

Next week, markets will take cues from the RBI’s policy meeting and we expect them to tone down their stance given positive macro data and dovish commentary from Jerome Powell. Also, investors would keenly watch for the outcome of the Gujarat Assembly elections due next week. The result in favour of the BJP would add to continued momentum as it would mean stability and set the stage for the 2024 Lok Sabha elections. However, if the BJP loses, it might result in some volatility in the market.

Other key data lined up for release next week are the OPEC meeting, US & India Service PMI and Europe Q3 GDP. On the global front, US monthly jobs data and inflation data before the US Fed policy meeting on December 14 would determine Fed’s next policy steps. Fed Chairman Jerome Powell in his speech recently had given indications of a slower rate hike in the December policy meeting, which had led to a rally in global markets.

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Moderation in inflation, an increase in US consumer spending and the US Fed Chairman’s positive commentary to slow down its pace of rate hike have instilled a positive outlook in the near term. Domestic macros too continue to point towards the pink health of the economy. GST collection for November surged 11% YoY and came in above Rs 1.4 lakh crore for the ninth successive month, while PMI manufacturing data for the month hit a three-month high at above 55. Even GDP growth stood strong at 6.3% for Q2. Apart from this, the festive season saw robust demand and this momentum is expected to continue with 3.2 lakh weddings expected to conclude this month.

Buying was seen in Oil & Gas stocks after news reports suggested that the government might remove windfall taxes if crude fell to $75. However, the auto sector saw some pressure on account of a mixed set of monthly numbers. Decline in the dollar index to five-month low and hopes of change in China’s zero-Covid policy led to momentum in the global sectors viz IT & Metals and this uptrend is likely to continue next week. The realty sector too could continue to see some traction on the back of a pick-up in property registration. We also expect buying to continue in FMCG stocks on the back of a revival in rural demand and a decline in oil prices. Even the valuations are at comfortable levels which makes them attractive with the market being at an all-time high.

Strong domestic macros, dovish commentary by US Fed and change in China’s zero-Covid policy boosted investor sentiments and led the market to enter in uncharted territory.

(The author is the head of Retail Research, Motilal Oswal Financial Services Limited)