The fresh week is likely to begin on a positive note for domestic markets, thanks to a strong rally in global markets. The focus will be on the RBI monetary policy outcome and quarterly results of India Inc that will start trickling in from this week.

Mandar Pitale, Head Treasury, SBM Bank India, said: The forthcoming Monetary Policy Committee (MPC) meeting from October 7-9 will be conducted with the induction of three new MPC members in place of the retiring members. During the last meeting held in August, internal RBI members were biased towards an extended policy rate hold. “Taking into consideration the current domestic growth inflation dynamics, with strong GDP growth and higher near-term inflation projection, these internal members are expected to stay tuned to an extended policy rate hold, with no urgency of an immediate easing to support growth,” he said.

Gift Nifty at 25,260 signals a gap-up opening of about 100 points for Nifty. However, FPI flows, especially after Chinese stimulus and strong US macro data, will be the key for a recovery in Indian markets, they said. T

According to IFA Global, all the US data that came in this week, right from JOLTS, ADP, ISM services, NFP, Unemployment Rate to Average Hourly Earnings Growth, were better than expected. This, again, highlights the incredible resilience of the US economy. Markets were pricing in 3 cuts by the end of 2024 until last week, but have now aligned with Fed’s dot plot, which indicates 2 cuts of 25bps

“It will be interesting to see if the China stimulus impact continues to propel Chinese equities higher next week. There has been a significant reduction in underownership of Chinese equities by global fund houses post the double barrel fiscal and monetary policy stimulus rolled out last week. However, there is still some room for underownership to correct further,” it added.

Dr VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services, said: In a sudden U-turn in strategy, FIIs turned massive sellers in the Indian market in October. During the three trading days in October, FIIs sold equity for Rs 30,718 crores in the cash market, according to provisional data. The selling has been mainly triggered by the outperformance of Chinese stocks. The Hang Seng index shot up by 26 per cent in the last one month, and this bullishness is expected to continue since valuations of Chinese stocks are low and the Chinese economy is expected to do well in response to the monetary and fiscal stimulus being implemented by the Chinese authorities.

“If the momentum in Chinese stocks continues, FIIs may continue to sell in India, where valuations are elevated. It remains to be seen how long the optimism lasts. Massive FII selling in financials, especially frontline banking stocks, have made their valuations attractive. Long-term domestic investors may utilise this opportunity to buy high quality banking stocks,” he added.

Motilal Oswal, in an India strategy report said: The monetary stimulus unleashed by China has sparked a wave of tactical FII outflows from India. Corporate earnings, after four consecutive years of healthy double-digit growth, are moderating due to pressures from commodities and fading tailwinds from BFSI asset quality improvements. 

The earnings revisions have turned adverse, with downgrades of about 6 per cent in the Nifty EPS since July 2024. The recent print from high-frequency indicators, such as power demand, PMI data, GST collections, and auto numbers, also indicates a softening in demand. The expensive broader market valuations (NSE Midcap index at 70 per cent premium to Nifty-50 and market cap at 146 per cent of GDP) and the narrowing of market breadth further complicate the risk-reward equation.

“Lastly, the outcomes of the recent state elections, while not a needle mover, may keep the markets on edge, as exit polls predict losses for the BJP in both Haryana and Jammu & Kashmir. Despite the challenges, the ongoing festive season, a better-than-expected monsoon over July-September 24, and a consequent pick-up in rural consumption provide a near-term catalyst for economic activity. Major global central banks, with the US Fed at the forefront, have decidedly pivoted towards a monetary easing cycle (not in response to an extant crisis – like Covid or GFC – but to normalise rates). This shift implies a favourable environment for risk assets. Consequently, the markets appear to be experiencing a genuine tug-of-war between the headwinds and tailwinds,” it added.

Meanwhile, Asian stocks are up strongly. Tokyo’s main Nikkei index jumped over 2 per cent; Korea and Taiwan equites are also up.