Markets Outlook: FII Activity & Macro Data in Focus

New Delhi, Dec 21 (PTI) Stock markets are likely to trade in a range-bound manner in a holiday-shortened week where trading activity of foreign investors, currency movement and global macroeconomic data announcements are expected to drive sentiments, analysts said.

Several global markets may see subdued activity on account of Christmas and New Year holidays, an expert said.

The domestic stock market would be closed on Thursday for Christmas.

"This week marks the onset of the year-end festive period and will be holiday-shortened due to the Christmas break, which may keep trading volumes subdued. On the domestic front, markets will track infrastructure output data, along with updates on bank loan growth, deposit growth, and foreign exchange reserves. Currency movement and crude oil prices will also remain important variables.

"Globally, performance of major markets—particularly the US—will be closely monitored for directional cues," Ajit Mishra – SVP, Research, Religare Broking Ltd, said.

"While strong domestic liquidity continues to act as an effective buffer against deeper downside risks, lending resilience to the market structure, the re-emergence of foreign fund inflows is increasingly being viewed as a potential catalyst for the market's next leg higher, improving overall risk appetite," Ponmudi R, CEO - Enrich Money, an online trading and wealth tech firm, said.

That said, the sustainability of the late-week momentum will largely hinge on key global macroeconomic cues, particularly upcoming US GDP and core personal consumption expenditure (PCE) data, which are expected to offer deeper insights into the health of the US economy amid evolving inflation –growth dynamics, he said.

"Market sentiment has turned more constructive after lower-than-expected US inflation data revived expectations of further monetary easing by the US Federal Reserve—an environment that has historically been supportive for emerging market equities, including India," Ponmudi R added.

Last week, the BSE benchmark declined by 338.3 points or 0.39 per cent, and the Nifty dipped by 80.55 points or 0.30 per cent.

"Selling pressure dominated most sessions; however, a recovery in the final trading day—driven by value buying and renewed interest from foreign portfolio investors (FPIs)—helped limit the downside..." Mishra added.

On Friday, the 30-share BSE Sensex jumped 447.55 points or 0.53 per cent to settle at 84,929.36. The 50-share NSE Nifty climbed 150.85 points or 0.58 per cent to 25,966.40.

"This week, we expect markets to trade in a range with a positive bias, following signs of improving FII participation (buying in two continuous trading sessions offering some relief after weeks of relentless selling) and a marginal recovery in INR vs USD. Several global markets will see subdued activity on account of Christmas and New Year holidays.

"Key macro data releases during the week include US and UK GDP, US consumer confidence data. Overall, market is likely to remain sideways, with investor focus gradually shifting towards the upcoming Q3 corporate earnings season," Siddhartha Khemka - Head of Research, Wealth Management, Motilal Oswal Financial Services Ltd, said.