After a sharp dip in sentiment driven by escalating tensions between India and Pakistan, equity markets are poised for a cautious recovery this week, buoyed by a ceasefire agreement announced over the weekend. The truce, along with key macroeconomic data releases and corporate earnings, will shape investor sentiment in the coming sessions.
Ceasefire Triggers Relief Rally Expectations
Markets closed last week on a nervous note, struggling with pressure due to geopolitical uncertainties in the wake of the Pahalgam terror attack. However, the ceasefire agreement reached between the two nuclear neighbors on Saturday night has offered some respite and allayed concerns about unrest in the area. Although gains would depend on how long diplomatic developments last, traders and fund managers now anticipate a partial sentiment rebound.
De-escalatory moves by other sources of geopolitical tensions, such as Russia’s recent move of unconditional dialogue with Ukraine, also help in easing cross-border tensions and can enhance the world’s risk appetite.
Macroeconomic Data in Focus
Investors will closely monitor local inflation. Prints this week as the Ministry will publish Consumer Price Index (CPI) and Wholesale Price Index (WPI) figures. They will decide on the Reserve Bank of India policy, particularly after ongoing concerns over core inflation stickiness and international commodity volatility.
Any deviation from market expectations could spur volatility, especially in rate-sensitive sectors such as banking, auto, and consumer durables.
Corporate Earnings to Guide Stock-Specific Moves
The earnings season continues in full swing, with key companies scheduled to announce their quarterly numbers. Among the headline names are PVR INOX, Tata Steel, Bharti Airtel, GAIL, Hero MotoCorp, Tata Motors, and Godrej Industries. Analysts will be watching margin trends, volume growth, and management commentary for forward-looking cues.
Underwhelming results last week from some mid-cap counters weighed on market breadth, underscoring the growing divergence in sectoral performance.
Institutional Flows Offer Support
Foreign Institutional Investors (FIIs) continued their buying wave with net purchases of ₹5,087 crore during the previous week, as Domestic Institutional Investors (DIIs) invested more than ₹10,450 crore in Indian equities. The twin inflow indicates the inherent confidence in India’s growth path in spite of short-term external shocks.
The longer-term trends of both sides can serve as a shock absorber against macro headwinds and aid in market resilience amidst imminent global risks like oil price actions and US Fed statements.
Key Catalysts for the Week Ahead:
- India-Pakistan ceasefire aftermath: Diplomatic stability may support a short-term rally.
- Inflation data (CPI/WPI): Critical for interest rate outlook and monetary policy cues.
- Corporate earnings: Sector leaders from telecom, steel, and auto to reveal Q4 performance.
- FIIs and DIIs: Institutional activity to remain a sentiment driver amid global cues.
As always, markets remain sensitive to both geopolitical and economic developments, and a cautious but watchful approach is expected from investors. While the ceasefire brings a much-needed breather, sustained optimism will require follow-through on both peace efforts and domestic economic stability.
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