Markets

Published: May 8, 2023
Updated: May 8, 2023

India's Stock Market Outlook Relies on Inflation Figures

The Indian stock market saw cumulative gains this week, but the session on Friday closed with sharp losses due to profit booking and banking stock declines. The recent collapse of Silicon Valley Bank, as well as other banks, has sent ripples across the global banking industry and raised fears of a contagion effect across economies.

Record high GST collections and FPI support give continued booster dose to Markets

Earlier last week, firm GST collections, weakness in the US dollar, and continued foreign fund inflows supported Indian stocks. Foreign portfolio investors have remained net buyers in Indian stock markets for the second straight month.

Market analysts expect the Indian stock market to remain at current levels after the sharp slide in the banking index, and the global cues have been lacklustre. The European Central Bank raised rates by 25bps and signalled the need for further rate hikes, while Wall Street has witnessed prolonged selling pressure due to apprehensions in the banking sector about the strength of regional banks.

Indian Inflation data likely to be on the positive side

The release of US and Indian inflation data for April will be keenly watched by market participants to get a direction. Consumer inflation in the US moderated in March to 5.0 per cent from 6.0 per cent the previous month, but the numbers are still above the 2 per cent target. Raising interest rates typically helps in cooling demand in the economy and thus helps in managing inflation.

The headline consumer price index-based inflation has gradually declined from its peak of 7.8 per cent in April 2022 to 5.7 per cent in March 2023, which is below RBI's upper tolerance band of 6 per cent.

Markets may remain at current levels in short term before some big factor or trigger could affect markets later

Indian stock market outlook is closely linked to inflation figures, and the release of US and Indian inflation data for April will be crucial to get a direction. Market analysts expect the Indian stock market to remain at current levels in the short term, and foreign fund inflows will remain an essential factor.