Indian stock market will be looking at global cues in upcoming week, say analysts

After witnessing a strong rally on Friday, market analysts have expressed a positive outlook for the stock market for the upcoming week. The Indian stock markets witnessed a strong rally on Friday, with both the NSE Nifty 50 and the BSE Sensex posting significant gains.

On Friday, August 16, the Nifty 50 at the National Stock Exchange (NSE) surged by 397.40 points, or 1.65%, to close at 24,541.15, while the Sensex jumped 1,330.96 points, or 1.68 %, ending the day at 80,436.85.

As per market analysts, the equity markets are buoyed by favourable global cues, and are expected to remain positive in the upcoming weeks. "We remain positive on the Indian markets and expect a move up," said Ajay Bagga, Market and banking expert.

The market analysts say that in the coming week, investors will be looking at the American Fed comments, which is expected to cut policy rates in its next monetary announcement, after the end of the domestic earning season.

"With the earnings season concluded, attention will now shift to global markets for cues, particularly in light of the notable recovery in U.S. markets, which has eased recession fears," said," Ajit Mishra - SVP, Research, Religare Broking Ltd.

"Domestically, market participants will be watching institutional flows and upcoming economic data, such as the HSBC India Manufacturing PMI and HSBC India Services PMI, for direction," he added.

Observing a cautious approach of the investors, Bagga stated that the markets are now worried about the Fed rate cuts that could lead to weaker stock markets over the next few months. However, he expressed his optimism saying there have been instances where the correction has been short-lived and shallow.

"Given that we are at a mid-cycle US economic consolidation, rather than a full-blown, or incipient US recession, this time around may prove to be an instance of a shallow and short-lived market correction," Bagga added.

In the last week, global markets provided a boost to investor sentiment. In the US, recent economic data pointed to a slowdown in inflation, with the CPI dropping to a three-year low of 2.9%. Retail sales in July also exceeded expectations, growing by 1%, which fueled speculation that the US Federal Reserve may cut interest rates by 50 basis points in September.

These developments triggered rallies in US markets, with the NASDAQ on Friday jumping nearly 2.5%, and both the Dow Jones and S&P 500 rising by around 1.5%.

Asian markets mirrored the positive trend, with Japan's Nikkei climbing 3.6%, Hong Kong's Hang Seng gaining 1.7%, and South Korea's Kospi and Taiwan indices both jumping by 2%.

The global rally added to the bullish sentiment in Indian markets, pushing indices higher. Despite recent market volatility, analysts remain optimistic about the medium to long-term outlook for Indian equities. However, short-term volatility may persist due to concerns over high valuations and geopolitical tensions, particularly with the US potentially heading toward a recession. Even significant interest rate cuts by the Federal Reserve may not be enough to prevent a downturn, says experts.