US Fed, Israel-Iran conflict and Q4 earnings will decide how the market moves next week

NEW DELHI: Volatility returned in Indian stock markets after a smooth rally at the start of April. The current volatility is primarily driven by Foreign Institutional Investor (FII) selling activity. Despite inflows in the primary markets, secondary markets have experienced significant sell-offs by FIIs, casting uncertainty over market sentiments.

"The coming week's price action in the markets will be determined by two major factors. The US Federal Reserve's rate setting committee meets in 10 days for its next FOMC meet," said Ajay Bagga, banking and market expert.

He added, "The second factor looming on the markets is the threat of any escalation in the Israel Iran direct conflict post the Passover festival getting over in Israel. Earnings season has so far progressed as per expectations but with both global and Indian large cap earnings slotted for the coming week, we can expect sharp market reactions".

Adding to the unease, Indian bond yields have surged over the past two weeks, signaling apprehension and uncertainty surrounding US rate cuts and geopolitical tensions.

The upcoming week is poised to bring forth earnings reports from both global and Indian large-cap companies. This is anticipated to trigger sharp market reactions and further amplify market volatility.

With no imminent catalyst on the horizon to provide reassurance to investors, markets are expected to experience more volatility and wider fluctuations in the coming days. Investors are advised to exercise caution and closely monitor market developments amidst the prevailing uncertainties.

Since April 10 when the market closed at an all-time high, the benchmark indices witnessed a sharp price correction, the Nifty ended 2.67 per cent lower while the Sensex was down by 2.55 per cent till Friday. Among Sectors, almost all the major sectoral indices witnessed profit booking at higher levels but IT index lost the most shed 4.7 per cent.

During the last week, market consistently faced selling pressure from investors at higher levels. However, on last Friday after a gap-down opening markets recovered and closed with a pullback in indices.

According to the experts, the medium-term market texture is still on the weak side due to temporary oversold conditions. Technically, on weekly charts, the index has formed a bearish candle and currently, it is trading below short-term averages, which is largely negative.

Industry experts highlight long positions in Brent crude oil as the preferred option for hedging against a further escalation. Allocations to gold and US Treasuries could also help protect against adverse outcomes.

In a recent development of the ongoing geopolitical tensions, At least three people were injured following five explosions at a pro-Iran military base in Iraq on Saturday, CNN reported, citing a security official.

The investigation into the blasts that occurred "at the Kalsu military base in the Al-Mashrou district on the highway, north of the Babylon Governorate," is underway. Israeli and US officials said neither was involved in the blast, a day after a military strike on Iran which has been attributed to Israel.