The Indian stock market has experienced a volatile week, influenced by a combination of domestic and international factors. As investors look ahead, several key events and trends are likely to shape market movements in the coming days. Here are five potential triggers for the Indian stock market this week:
1. RBI Monetary Policy Committee (MPC) Meeting: The Reserve Bank of India's (RBI) Monetary Policy Committee (MPC) is convening from September 29 to October 1. The meeting will conclude with an announcement by RBI Governor Sanjay Malhotra regarding the committee's decision on the repo rate and other key policy measures. The RBI had previously paused rate cuts in its August meeting after reducing the repo rate by a total of 100 bps earlier in the year. Market sentiment is divided between expectations of a rate cut and a prolonged pause. Some analysts anticipate a "dovish tilt" and a potential rate cut to support economic growth, while others believe the RBI will maintain the status quo to monitor inflationary pressures. Nomura has assigned a 70% probability to a 25 bps rate cut in October and a 30% chance that the RBI holds rates. A Goodreturns poll indicates that a majority of economists expect the RBI to hold the repo rate steady at 5.5%. An SBI study suggests that a 25 bps rate cut would be the best course of action for the RBI, projecting it as a forward-looking central bank. Citi expects two possible outcomes from the MPC meeting: an "insurance" repo rate cut to protect against downside growth risks or a "dovish pause" with an explicit assurance to act soon if required.
2. India-US Trade Deal Negotiations: Trade discussions between India and the United States are ongoing, even amidst recent trade and diplomatic tensions. Commerce Minister Piyush Goyal's recent visit to the US included meetings with Ambassador Jamieson Greer, United States Trade Representative, and Sergio Gor, US Ambassador-designate to India. Both countries have affirmed their commitment to continue trade talks. India and the US are aiming to complete the first stage of a mutually beneficial Bilateral Trade Agreement (BTA) by October-November 2025. A potential trade deal could involve a "grand bargain" on oil, according to New Jersey Governor Phil Murphy. The US has urged India to curb its imports of Russian crude oil, linking it to tariff reductions and the finalization of a trade agreement. India has also offered to buy corn from the US for ethanol production and increase energy purchases as part of a trade deal.
3. Impact of US Tariffs: The recent imposition of tariffs by the United States on Indian goods, including a 100% tariff on branded and patented pharmaceutical products, has negatively impacted market sentiment. The tariffs have raised concerns about earnings and export margins for Indian companies, particularly in the pharmaceutical sector. The Nifty Pharma Index has declined, reflecting the impact of the tariff announcement. Nomura believes that the negative impact of US tariffs on Indian exports will outweigh the consumption boost from recent Goods and Services Tax (GST) cuts.
4. H-1B Visa Fee Hike: The increase in H-1B visa fees by the US administration has also dampened market sentiment, particularly for IT stocks. The higher visa fees raise concerns about increased operational costs and hiring restrictions for Indian IT companies.
5. Foreign Portfolio Investor (FPI) Activity: Sustained selling by foreign portfolio investors (FPIs) has contributed to the market's downward trend. Continuous FII selling pressure has intensified investor concerns.
In conclusion, the Indian stock market faces a week filled with potential catalysts. The RBI's monetary policy decision, developments in India-US trade relations, the impact of US tariffs and visa fee hikes, and the behavior of foreign investors will all play a crucial role in shaping market direction. Investors will be closely monitoring these factors to gauge the outlook for Indian equities.
