The Indian share market is poised for a week where its trajectory will be heavily influenced by a confluence of domestic economic data and international developments, while as the new trading week commences on Monday, market experts indicate that the direction of the Indian equity market will largely hinge on the Wholesale Price Index (WPI) based inflation figures, the stance of foreign investors, and broader global signals. On top of that, the movement of the Indian Rupee against the US Dollar and fluctuations in crude oil prices are also expected to play a significant role in shaping investor sentiment, while the domestic stock markets experienced considerable volatility last week, ultimately closing in the red, which has added to investor apprehension.
Last Week's Market Performance and Key Headwinds
Last week proved to be a challenging period for investors in the Indian share market, marked by significant uncertainty. By the close of the week, the BSE benchmark index, Sensex, registered a decline of 444. 71 points, or 0. 51 percent. This downturn was primarily attributed to the persistent outflow of foreign funds and a sharp depreciation of the Indian Rupee against the US Dollar, both of which exerted considerable pressure on investor confidence. Market analysts suggest that these factors are likely to continue influencing market movements in the upcoming week. Investors are advised to approach their investments with caution amidst these prevailing headwinds, carefully monitoring the evolving economic landscape.
WPI Inflation Data Under Scrutiny
Ajit Mishra, Senior Vice President (Research) at Religare Broking Limited, highlighted that several crucial domestic data points are slated for release this week. Among these, the Wholesale Price Index (WPI) based inflation figures and trade balance data are paramount. WPI inflation data provides insights into the price trends of goods in the economy and can Notably influence the Reserve Bank of India's monetary policy decisions, while should inflation figures exceed expectations, it could heighten fears of interest rate hikes, potentially leading to a negative impact on equity markets. Concurrently, trade balance figures, which reflect the country's import and export status, will have implications for the Rupee's trajectory and foreign exchange reserves.
Persistent Foreign Fund Outflows and Rupee Depreciation
The continuous withdrawal of funds by Foreign Portfolio Investors (FPIs) from the Indian share market remains a significant concern, while in the first two weeks of the current month alone, foreign investors have divested shares worth 17,955 crore rupees from the Indian equity market. This recent outflow has pushed the total FPI withdrawal for the year 2025 to a substantial 1. 6 lakh crore rupees, while ajit Mishra emphasized that the sustained outflow of foreign funds coupled with the sharp depreciation of the Rupee has placed immense pressure on investor confidence. When foreign investors withdraw capital in large volumes, it reduces market liquidity and exerts downward pressure on stock prices. A weaker Rupee also makes imports more expensive and diminishes the attractiveness of foreign investments.
Global Cues and India-US Trade Negotiations
Beyond domestic factors, global cues are also expected to play a pivotal role in determining the direction of the Indian share market. Mishra noted that the performance of US markets globally and the macroeconomic. Signals emanating from there will influence investor sentiment in the near term. Data related to the US economy, such as inflation, employment, and interest rates, affect global investors' risk appetite, which in turn impacts Indian markets. On top of that, developments surrounding India-US trade negotiations will also be closely watched by investors. Any substantial progress in these talks could act as a positive catalyst for the market.
Expectation of Range-Bound Market
Siddharth Khemka, Head of Research for Asset Management at Motilal Oswal Financial Services Limited, offered his perspective on the market outlook, stating that overall, they expect markets to remain range-bound, although broader indices might experience volatility. This implies that while significant unidirectional rallies or declines are less likely, minor fluctuations and recoveries could be observed. He further added that if there is concrete progress regarding the India-US trade agreement, it could lead to a meaningful rally in the market. Such an agreement would strengthen trade relations between the two nations. And potentially create new opportunities for Indian companies, thereby boosting investor confidence.
In the upcoming week, investors will need to closely monitor all these key issues. Domestic economic data, trends in foreign investment, the Rupee's movement, and global developments will collectively determine the market's next direction. Prudence and research-backed investment decisions will be crucial in this volatile environment.
