Global factors and FII activity will dictate trends in domestic equity markets this week while assembly poll results of Maharashtra and Jharkhand may impact stocks on Monday, say analysts.
Stock markets witnessed a spirited recovery on Friday with benchmark Sensex and Nifty notching the best single-day gains in more than five months and offering relief after weeks of correction.
On Friday, Sensex jumped 1,961.32 points or 2.54 per cent to settle at 79,117.11 while Nifty soared 557.35 points or 2.39 per cent to 23,907.25.
"On the domestic front, the outcomes of the Maharashtra and Jharkhand elections will be crucial triggers.
"Especially Maharashtra where NDA witnessed a one-sided victory which is likely to boost bullish sentiment further. However, global factors continue to pose significant risks.
"Escalating tensions between Russia and Ukraine, alongside rising crude oil prices, have added to inflationary concerns," Santosh Meena, head of research, Swastika Investmart Ltd, said.
A strengthening US dollar index and elevated US bond yields are weighing on the rupee, leading to record foreign institutional investor (FII) outflows.
"The direction of FII flows will remain a key determinant for the markets following the recent correction," Meena added.
The BJP on Saturday pulled off a stunning performance in Maharashtra winning a record number of seats to propel the party-led ruling Mahayuti alliance to a landslide victory while the INDIA bloc stormed back to power in Jharkhand on the back of a spectacular showing by the JMM.
Global oil benchmark Brent crude and the rupee-dollar trend would also influence trading in the stock market.
Global triggers, including US economic data such as GDP growth rate, and FOMC (Federal Open Market Committee) meeting minutes, will play critical roles in shaping investor sentiment, Meena added.
"Overall, the political outcomes, particularly in Maharashtra, suggest a positive outlook for the Indian stock market, especially in sectors that benefit from infrastructure development and political stability," Palka Arora Chopra, director, Master Capital Services Ltd, said.
Macroeconomic indicators, including GDP and infrastructure output, will garner significant attention.
"Participants remain focused on FII fund flows, given their ongoing selling spree," Ajit Mishra – SVP, Research, Religare Broking Ltd, said.
Last week, the BSE benchmark zoomed 1,536.8 points or 1.98 per cent, and the Nifty climbed 374.55 points or 1.59 per cent.
Most sectors, except energy, contributed to the rebound, with realty, auto, and FMCG leading the pack.
IT and banking played a pivotal role in capping losses and driving the recovery in the benchmark.
Broader indices also edged higher, with gains ranging between 0.9% and 1.8%.
"On Monday, the market will react to the outcome of state assembly elections in Maharashtra and Jharkhand along with other global triggers including developments in the Russia-Ukraine war," Siddhartha Khemka, head - research, Wealth Management, Motilal Oswal Financial Services Ltd, said.
