Market is likely to start the week on a positive note amid strong global cues.

Benchmark indices BSE Sensex and Nifty 50 recorded the highest gains in around eight weeks last week even as the market remained volatile owing to Omicron fears. The SGX Nifty above 17,680 indicates a gap opening for the Nifty 50.

Wall Street advanced on Friday with the US inflation data being in line with market expectations ahead of the US Fed meet. The S&P 500 recorded an all-time closing high even as the US reported the highest increase in consumer prices in nearly four decades.

Asian equities surged further in early deals on Monday, gaining 0.5-1 per cent, tracking cues from the US markets.

Inflation data, the US Fed decision to influence markets this week

The outcomes of the US Fed policy meeting and macroeconomic inflation data points will determine the course of the domestic market this week, according to experts.

According to Santosh Meena, Head of Research, Swastika Investmart Ltd, the market is heading for outcomes of the policy of Global Central banks after dovish RBI.

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“The market will remain busy this week to deal with outcomes of the policy of global Central banks where the decision of the US Fed will be the most important that is scheduled on December 15. European Central Bank, Bank of England, Swiss National Bank, and Bank of Japan will also come out with their monetary policies next week. The recently announced the US inflation numbers are in line with expectations and it was not as bad as there was fear therefore the market is not expecting any negative surprise from the US Fed,” added Meena.

Relentless FII selling

However, volatility is expected to continue owing to the spread of the Omicron variant of coronavirus. Further, relentless FII Selling has also continued to weigh on investor sentiments.

“The impact of the omicron variant on market has cooled off but the news flows related to omicron may continue to cause some volatility. There is not much clear trend in the dollar index and the US 10-year bond yields however our market will be interested to know FIIs’ behaviour after a period of relentless selling,” said Meena.

Dr VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services said, “As per NSDL data, FPIs have sold equity worth ₹17,484 crore up to December 10. Coming on top of the ₹33,799 crore selling in November, this is relentless selling. Importantly sustained selling is in banking in which FPIs have the largest holding.”

“This is the reason why banking has been under pressure. FPIs have been sellers in IT too. Paradoxically, banking and IT are two segments that have good earnings visibility. So, DIIs and HNIs have been absorbing FPI selling. Since FPIs have large holdings in banks and IT so they may continue to sell in these segments. But the pace of selling is likely to come down if the markets remain resilient,” added Dr Vijayakumar.

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FIIs sold equities worth ₹1,092.4 crore on Friday while DIIs purchased equities with ₹386.63 crore, exchange data showed.

Joseph Thomas, Head of Research, Emkay Wealth Management said, “The domestic equities have witnessed regular inflows from the retail investors in the form of SIPs, while the FPIs continued to be sellers reflecting the general mood among overseas investors for emerging markets. These global factors, especially the US inflation numbers and the developments around central bank policy meetings are likely to influence the course of the markets.”

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