Global Cues, Inflation Trends Likely To Drive Domestic Equity Market, Say Analysts

Domestic equity investors are likely to keep a close watch on global cues, especially the fallout of the U.S.-based Silicon Valley Bank failure, inflation trends and foreign fund flows in the coming week after days of volatile trading sessions.

After the holiday-shortened trading sessions this week that saw the benchmark Sensex declining more than 1%, analysts opined that investors will be waiting for the consumer price inflation data for February to be released on Monday.

'Poor global cues were major contributors to the weakness in the Indian equity markets, and they will continue to be significant next week,' Santosh Meena, Head of Research at Swastika Investmart Ltd., said.

The failure of the Silicon Valley Bank, a key funding source for startups in the technology space, has sparked concerns regarding the overall health of the global financial system amid central banks raising interest rates to tackle inflation.

'The global market has fallen back into the grip of uncertainty following the U.S. Federal Reserve chief's comment that signalled the possibility of a prolonged and faster rate hike, contradicting a dovish comment made by another Fed official last week,' Vinod Nair, Head of Research at Geojit Financial Services, said.

On Friday, the 30-share BSE Sensex tanked 671.15 points or 1.12% to settle at 59,135.13 points amid weak global cues and foreign institutional investors offloading shares.

According to Meena, Chinese industrial index production numbers and institutional fund flows will be crucial as Foreign Institutional Investors are still in the selling mode if certain block deals are excluded.

On the other hand, Nair also noted that higher-than-expected jobless claims in the U.S. that came on Friday helped alleviate some concerns about the Federal Reserve becoming more strict on interest rate hikes.

During the week ended March 10, the benchmark dropped 1.12% or 673.84 points.