2 Key Events to Dictate Nifty 50 Trend Next Week!

So far, the index seems to be in pretty good shape, despite a small correction on Friday. It does not seem to be worrisome yet and should be taken as a healthy correction after a massive run-up. However, the next week could throw some surprises, on account of two key events which the market participants would be setting their eyes on.

RBI MPC

The Reserve Bank of India is set to commence the last monetary policy committee (MPC) meeting of the year, from 5 – 7 December 2022. As what has been the trend of the year so far, a rate hike is almost confirmed, the only question is by how much. Despite going quite aggressive in increasing interest rates this year, inflation is still hovering over the 6% mark for over 10 months now. The RBI tries to contain within a 2% – 6% tolerance band, so clearly, pressure on it to keep the rate hikes intact would be there.   

However, the good part is, inflationary pressure has also started to ease. The CPI data for October 2022 came in at 6.77%, which is noticeably down from the preceding month’s CPI of 7.41%. In fact, dropped to 7.7% in October 2022 which is the lowest since 7.9% in February 2022. The recent plunge in prices on account of newer restrictions in China amid rising Covis-19 cases, is the icing on the cake. 

Another reason for the RBI to suppress its aggression is the recent GDP numbers. The July-September 2022 quarter recorded growth of 6.3%, compared to 8.4% in the same period a year ago and 13.5% in the previous quarter. As a rate hike is a two-sided sword that tames inflation but at the cost of a hit to GDP, we would likely be seeing a slowdown in the amid the previous 3 consecutive 50 bps hikes. A consensus of economists is expecting around a 35 bps hike this time.  

Gujarat election results

The second big event for the market to digest would be the election result of Gujarat. There’s no doubt that the market would be cheering to the BJP’s clean sweep, while BJP’s loss might result in a decent correction in the indices. It’s quite difficult also to throw the BJP out of the ring in Gujarat, by any party, and this is probably what is currently being discounted by the markets – A thumping victory. 

Aam Aadmi Party could be a tough contender this time, especially after their victory in Punjab, but still, the craze for PM Narendra Modi in Gujarat is unmatched. While for Congress, it might be able to make some impact after its Bharat Jodo Yatra, but probably not enough to come into power. The result would be announced on 8 December 2022. Hence, the next week could be volatile and traders should remain cautious.

PS: I am not affiliated with any political party 🙂