Domestic markets are likely to come under renewed pressure on Thursday as inflation rose sharply, and IIP contracted.
SGX Nifty at 17,040 indicates a 75-point gap down for Nifty on Thursday, as Nifty futures on Wednesday closed at 17,114.80.
US Fed’s minutes
Most stocks are ruling with moderate weakness in early deals on Thursday across the Asia-Pacific region following the US Fed's minutes that revealed their stance on rate hikes with calibrated approach.
"The Fed Minutes showed tightening will continue even as the labor market slows. The key takeaway from the minutes was that several participants noted that it would be important to calibrate the pace of further policy tightening with the aim of mitigating the risk of significant adverse effects on the economic outlook," Edward Moya, Senior Market Analyst, The Americas OANDA.
"We’ve heard from Fed’s Daly and Brainard and they have voiced support for remaining data-dependent when it comes to future hikes and right now it looks the data is about to get ugly. It will be hard for the Fed to remain aggressive with tightening as the economic deteriorates quickly," he added.
Meanwhile, domestic headwinds to our markets are under check, said analysts.
Weak CPI, IIP data
While the consumer price index for September rose 7.41 per cent y-o-y, industrial production based on the IIP contracted to 0.8 per cent in August as against an expansion of 2.2 per cent in July.
"With September retail inflation rising to 7.41% the RBI has a major challenge ahead. The MPC will have to continue raising rates most likely by 50 bp in the next meeting and this will adversely impact economic growth which is already showing signs of deceleration," Dr VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
Nish Bhatt, Founder & CEO, Millwood Kane International, said: "It's a double whammy on the economic data front. The retail inflation for the month of September has hit a 5-month high, whereas the industrial production output has contracted."
Analysts advise investors to remain cautious about Indian stocks.
"We feel it’s just a respite in a corrective phase and the tone would remain negative until Nifty decisively reclaims 17,400 levels. Amid all, the buoyancy in the banking space is capping the damage so far while others are seeing a mixed trend. We feel it’s prudent to stay light in the prevailing scenario and keep the existing positions hedged," said Ajit Mishra, VP - Research, Religare Broking Ltd.