Analysts say stocks brace for volatility as RBI’s policy, focus on West Asian conflict

Domestic stock markets are expected to remain volatile this week as investors monitor the Reserve Bank’s monetary policy decision, key global macroeconomic data and the impact of West Asian conflicts, analysts said.

Movements in crude oil prices and foreign fund inflows will also affect domestic equities, they added.

Vinod Nair, head of research at Geojit Investments Ltd, said that while the RBI’s Monetary Policy Committee (MPC) meeting will command center stage at the domestic level, investors will closely monitor the central bank’s stance on inflation and growth.

“A rate break is almost certain consensus, with the central bank signaling softening growth amid crude-driven inflation risks and a four-year low manufacturing PMI. The governor’s comments on the path of the rate cycle and FY27 projections will be closely watched.

“Globally, the US March CPI reading will hold significant significance, as it buries residual hopes of a Fed rate-cut, strengthens the dollar and tightens monetary conditions for emerging markets, including India,” Nair said.

He noted that geopolitical developments in West Asia will remain the overriding factor influencing market sentiment.

“Indian markets bounce back after a three-day gap and crude’s trajectory and any credible ceasefire signal are crucial variables that could either trigger a sharp relief rally or extend the current sell-on-rise mode,” Nair added.

In the holiday-short last week, the BSE benchmark Sensex was down 263.67 points or 0.35 percent and the NSE Nifty was down 106.5 points or 0.46 percent.

Siddharth Khemka – Head of Research, Wealth Management, Motilal Oswal Financial Services Ltd. said Indian equities are likely to remain volatile this week, with investor sentiment closely linked to developing developments in the ongoing conflict in West Asia.

Brent crude prices remained elevated near USD 107 per barrel, maintaining concerns over imported inflation. Currency pressures have also intensified, with the rupee weakening sharply before recovering to 93 rupees against the US dollar, aided by RBI intervention, he added.

Selling by foreign institutional investors (FIIs) has been another major overhang, with March at Rs. 1.2 lakh crore witnessed a sharp outflow, one of the highest monthly outflows in the last several years.

“Investors will be watching US Federal Open Market Committee (FOMC) meeting minutes, GDP data and preliminary jobless claims for further signals on growth and the policy path.

“Overall, markets are expected to remain volatile as geopolitical developments, crude price movements, FII inflows and global macro data drive sentiment,” Khemka said.

According to analysts, any signs of an abatement in West Asian conflicts could be tempered by softer crude prices and currency stability, while further growth risks averting and maintaining pressure on foreign flows.