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Below is the Weekly Market Outlook By Vinod Nair, Head of Research at Geojit Financial Services

Despite the optimistic result announced by the blue chips, this week’s market sentiment suddenly got dampened by the unfavourable research report on Asia’s richest promoter Group companies. The same is obnoxiously affecting banking stocks (BSE Bank down by >5%), despite its positive results owing to high group lending; with PSU banks being the most impacted due to high exposure.

The market appeared to be uneasy ahead of the upcoming Union Budget and Fed meeting, and FII were selling as funds are being shifted to other EMs because of attractive valuations. The Union Budget and FOMC are both scheduled for release on February 1st, and the market will take cues from the outcomes next week. Any increase in funding towards capital expenditure and rural areas within the constraints of the fiscal deficit controls will be favourable, while any unfavourable proposals, such as an increase in LTCG rates/ duration or populist measures due to the pre-election budget, could add to the bearish mood in the short-term. According to the most recent survey, the FOMC is expected to raise rates by 50 basis points at the upcoming meeting, and any decrease from this level will be considered positive. The recent trend of an uptick in crude prices due to a rebound in demand from China may add pressure to the domestic market in the near-term.

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