NEW DELHI (Economy India): The trajectory of India’s equity markets in the coming week will be shaped by foreign institutional investor (FII) activity, movements in the US dollar, and key global macroeconomic indicators, analysts said, cautioning that holiday-thinned trading volumes could keep markets range-bound.
Market participants noted that Christmas and New Year holidays across major global financial centres are likely to result in subdued activity. Domestic equity markets will remain closed on Thursday on account of Christmas.
FII Activity in Focus
Foreign investors’ positioning will remain a key determinant of near-term market sentiment. Analysts said sustained FII selling in recent weeks, driven by higher US bond yields and a strong dollar, has exerted pressure on Indian equities despite resilient domestic fundamentals.
Any moderation in FII outflows—or signs of selective buying—could provide temporary support to benchmark indices, especially in large-cap stocks.
Dollar Index and Global Yields
The movement of the US dollar index and Treasury yields will continue to influence capital flows into emerging markets, including India. A stronger dollar typically dampens risk appetite for emerging market assets, while easing yields could offer relief.
Global investors will closely track macroeconomic data from the US and Europe, particularly indicators related to inflation trends, growth outlook, and central bank policy cues.
Limited Triggers, Range-Bound Trade Likely
Analysts expect the markets to trade within a narrow range due to the absence of major domestic triggers and reduced participation from global investors during the holiday season.
“Volumes are expected to remain light, and volatility could be capped unless there is an unexpected global development,” a market strategist said, adding that stock-specific action may dominate trading sessions.
Domestic Factors Still Supportive
Despite near-term volatility, experts pointed out that India’s macroeconomic fundamentals remain relatively strong, supported by steady GDP growth, controlled inflation, and ongoing public capital expenditure. However, global cues are likely to outweigh domestic positives in the short run.
Investors are advised to remain cautious, track global developments closely, and avoid aggressive positioning in a low-liquidity environment.
(Economy India)
