Will Nifty, Sensex fall for 6th straight session on Monday? US Fed among 5 factors to watch this week

The Indian stock market extended losses for the fifth consecutive session. Sensex and Nifty tumbled more than 1% intraday before paring most of the losses and closing 0.4% lower each on Friday, as oil prices above $100 per barrel, FII selling and other factors spooked investors.

Here are 5 factors that will decide the mood of the market:

1) US Fed meeting – The Federal Reserve's upcoming meeting from July 28-29 is expected to provide fresh clues on the future path of interest rates as oil prices surge and concerns over threats to the Strait of Hormuz grow amid the US-Iran war.


The meeting comes as escalating tensions in the Middle East have pushed Brent crude to $100 a barrel. The rise in oil prices has fuelled concerns that the Fed may need to take a more aggressive approach to interest rates to contain inflation, which has remained well above the central bank's 2% annual target.

The Fed is widely expected to keep interest rates unchanged when it announces its monetary policy decision on Wednesday. However, Fed funds futures were pricing in a 38% chance of a 25-basis-point rate hike, according to LSEG data available late on Friday. There is still some uncertainty on Wall Street over whether the central bank could surprise markets, particularly as new Fed Chair Kevin Warsh moves to overhaul the way the Fed communicates its monetary policy.

The upcoming meeting will be the second under Warsh, who has avoided providing forward guidance while maintaining his commitment to bringing inflation back to the Fed's 2% target.

2) Rising oil prices – Crude oil rose 10% this week after the US-Iran conflict intensified again, with the US military carrying out its 13th consecutive night of strikes on Iran. At the same time, Iran-aligned Houthis said they had attacked two Saudi oil tankers in the Red Sea and announced a naval blockade on Saudi Arabia. The latest escalation has unsettled investors, coming after a fragile ceasefire had offered markets a brief period of relief.

Oil prices surged above $100 a barrel for the first time this week following the Houthi attacks on the two Saudi tankers. The strikes raised concerns that the Bab el-Mandeb shipping route could be shut, threatening another major energy transit channel.

3) Q1 results – A host of major companies such as Adani Enterprises, Adani Ports, Asian Paints, Bajaj Housing Finance, Dabur, Eicher Motors, Garden Reach, L&T, HUL, Suzlon, Tata Capital, Sun Pharma, Bharat Electronics, Canara Bank, Coal India, Coforge, Godfrey Phillips, Happiest Minds, Indus Towers, Tata Chemicals, Tata Power, Tejas Networks and Ambuja Cements, among others, will announce results. Investors will be closely tracking management commentary and brokerage reactions for cues on the road ahead.

4) FII-DII activity – Foreign institutional investors (FIIs) remained net sellers during the current week, offloading Rs 7,180 crore, according to provisional exchange data. Domestic institutional investors (DIIs), meanwhile, remained net buyers, investing Rs 8,640 crore.

FII flows are likely to remain volatile until there is greater clarity on geopolitical developments and sustained stability in crude oil prices. These factors will be crucial for restoring investor confidence and improving the outlook for equity markets.

5) Indian rupee – The Indian rupee weakened for the fourth straight week, ending near Rs 96.55 against the US dollar after failing to hold its recovery from recent highs of around Rs 96.10. The reversal wiped out much of the currency's earlier gains as elevated crude oil prices, geopolitical uncertainty and strong demand for the US dollar continued to weigh on the rupee.

For the USD/INR pair, the Rs 96.60-Rs 96.67 range remains a key resistance zone. A sustained break above this level could push the rupee lower towards Rs 96.90, with Rs 97 emerging as the next major level to watch. On the downside, a move below the Rs 96.50-Rs 96.45 zone could support a recovery towards Rs 96.20-Rs 96.30, while Rs 96 remains an important medium-term support level, experts say.

Market outlook

From a technical perspective, the index is currently trading below its key short- and long-term moving averages, while the 20-day and 50-day EMAs are trending lower, reflecting weakening momentum. The daily RSI is hovering around the 43 mark and remains below its 9-day average, indicating subdued momentum, says Sudeep Shah of SBI Securities.

Meanwhile, the MACD histogram continues to remain below the zero line, further reinforcing the prevailing bearish undertone. With momentum still tilted in favour of the bears, the battle now shifts to a crucial support zone that could determine the index’s next directional move.

Going ahead, the 23,650–23,600 zone will act as an important support area for the index. A sustained move below 23,600 could extend the correction towards 23,450, followed by the 23,300 level. On the upside, the 50-day EMA zone of 23,950–24,000 is likely to act as an important hurdle.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)