Fed decision, crude oil and global cues likely to drive stock market next week

Mumbai: The US Federal Reserve's policy decision, movements in crude oil prices and global monetary policy cues are likely to drive Indian equities in the coming holiday-shortened week, with the Nifty entering the period near a crucial support zone after posting its fifth consecutive weekly decline.

Indian markets will remain closed on Monday for Ganesh Chaturthi, giving investors their first opportunity on Tuesday to react to movements in global markets, crude oil and bond yields. The focus will then shift to the US Federal Reserve's interest rate decision and its latest economic projections, scheduled for Wednesday, September 16.

The Nifty ended Friday at 23,398.10, declining 79.70 points, or 0.34 per cent, while the Sensex closed at 74,781.76, down 120.83 points, or 0.16 per cent. The Nifty touched a three-month low during the week as selling pressure persisted across the broader market.

The Nifty Bank extended its losing streak to three weeks, while the Nifty Midcap index declined for a second consecutive week. The Nifty SmallCap index also slipped after gaining for three straight weeks, highlighting the broad-based weakness in domestic equities.

Sectoral performance remained mixed, with Nifty Realty emerging as the biggest laggard, while healthcare and pharmaceutical stocks were among the better-performing segments.

The US Federal Reserve's rate decision and FOMC Economic Projections will be the biggest global trigger for markets during the week. The announcement is due at 2 p.m. EDT on Wednesday, or 11:30 p.m. IST.

Markets are pricing in a high probability of a 25-basis-point rate hike following the latest inflation data. US headline CPI increased 0.4 per cent month-on-month and remained at 3.4 per cent annually in the September 11 report. Core inflation also rose 0.3 per cent from the previous month, although it eased to 2.4 per cent year-on-year.

For Indian equities, the market reaction could depend heavily on the Fed's communication and forward guidance rather than the rate decision alone. An unchanged policy rate, or a hike accompanied by balanced guidance, could support a relief rally if investors interpret the outcome as less restrictive than currently feared.

Global monetary policy will remain in focus beyond the US, with the Bank of England and Bank of Japan also scheduled to announce their policy decisions during the week.

Crude oil prices will be another key variable for Indian markets. Brent crude settled at $104.61 a barrel after briefly approaching the $110 mark, keeping concerns over inflation, corporate margins and India's import bill elevated.

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