Dalal Street Outlook: India & US Inflation, Q3 Earnings in Focus

The Indian stock market continued its upward trajectory for the second consecutive week, with the Nifty 50 edging up by 0.33 percent in the week ending February 7, despite periods of volatility.

Investor sentiment remained optimistic following the temporary suspension of tariffs on Mexico and Canada by US President Donald Trump, alleviating global trade concerns. However, caution set in later as markets awaited the Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) meeting. While the central bank announced a 25 basis point (bps) cut in the repo rate, it maintained a neutral policy stance, contrary to expectations of a shift towards accommodation. Additionally, the absence of further liquidity infusion measures disappointed investors. Foreign institutional investor (FII) outflows and a depreciating rupee weighed on market sentiment, though a decline in oil prices provided some relief.

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On Monday, the market could react to the outcome of the Delhi elections, where the BJP secured victory. Looking ahead to the week beginning February 10, analysts anticipate range-bound trading, with focus on macroeconomic data—such as Consumer Price Index (CPI) inflation—alongside US inflation, Federal Reserve Chair Jerome Powell’s testimony, the final set of Q3 corporate earnings, and developments regarding US tariffs.

During the past week, the Nifty 50 gained 78 points to close at 23,560, while the BSE Sensex advanced 354 points (0.46 percent) to 77,860. The Nifty Midcap and Smallcap 100 indices also posted gains of 0.2 percent each.

Key Market Insights for the Coming Week

1. Corporate Earnings

The earnings season for the December quarter will conclude in the upcoming week, with over 2,000 companies set to report results. Notable Nifty 50 firms releasing their earnings include Eicher Motors, Hindalco Industries, Apollo Hospitals, and Grasim Industries. Other key players announcing results include Lupin, Siemens, FSN E-Commerce Ventures (Nykaa), Honasa Consumer, Ipca Laboratories, National Aluminium Company, Bata India, Engineers India, Escorts Kubota, Patanjali Foods, Varun Beverages, Vodafone Idea, AstraZeneca Pharma, Berger Paints, IRCTC, NBCC, Ashok Leyland, Bharat Forge, Power Finance Corporation, Jubilant FoodWorks, Crompton Greaves Consumer Electricals, Hindustan Aeronautics, Muthoot Finance, Afcons Infrastructure, Manappuram Finance, United Breweries, Glenmark Pharmaceuticals, Aditya Birla Fashion and Retail, Dilip Buildcon, Dr. Agarwal’s Eye Hospital, and Narayana Hrudayalaya.

2. CPI Inflation Data

Investors will also monitor January’s CPI inflation figures, set for release on February 12. The inflation rate is projected to decline below 5 percent, compared to 5.22 percent in December 2024, marking a continued downtrend since October 2024 when it peaked at 6.21 percent—above the RBI’s target range of 4 percent (+/-2 percent). Additionally, industrial and manufacturing production data for December will be released the same day. On February 14, Wholesale Price Index (WPI) inflation figures for January, banking sector loan and deposit growth data (for the fortnight ending January 31), and foreign exchange reserves (as of February 7) will be disclosed.

3. US Inflation Trends

On the global front, all eyes will be on US inflation data, including the Producer Price Index (PPI), retail sales, and industrial production figures for January. Economists expect inflation to remain steady at 2.9 percent, unchanged from December 2024.

4. Federal Reserve Chair Powell’s Testimony

Fed Chair Jerome Powell is scheduled to testify before US lawmakers for the first time since July 2024, discussing the economic outlook and recent monetary policy decisions. His testimony before the Senate Banking Committee on February 11 and the House Financial Services Committee on February 12 will be closely analyzed. Since his last testimony, the US central bank has reduced interest rates by 100 bps over three meetings in 2024. However, in the January 2025 policy review, the Fed opted to maintain rates at 4.25–4.5 percent, stating that further rate cuts would depend on sustained progress in lowering inflation.

5. Global Economic Indicators

Beyond US inflation and Powell’s testimony, market participants will track Q4 2024 GDP estimates for Europe and the UK, as well as China’s January vehicle sales data.

6. Crude Oil Prices

Oil prices remain a key factor, especially for import-dependent economies like India. Brent crude futures, the global benchmark, have declined for three consecutive weeks, closing at $74.66 per barrel—1.33 percent lower than the previous week—after briefly surging above $80 per barrel last month. The recent downturn was influenced by former US President Donald Trump’s pledge to ramp up domestic oil production to curb inflation, coupled with a significant rise in US oil inventories. Market participants are also monitoring US sanctions on Iran, particularly those targeting oil exports to China.

7. FII and DII Flows

Institutional investor activity will also be crucial. In February so far, foreign institutional investors (FIIs) have been net sellers, offloading over ₹10,000 crore, adding to January’s net selling of ₹87,375 crore. Meanwhile, domestic institutional investors (DIIs) have been counteracting FII outflows, purchasing ₹7,274 crore worth of shares in February, following net buying of ₹86,592 crore in January.

The US dollar index ended the week at 108.096, marking a 0.37 percent decline, while the 10-year US Treasury yield fell 1.1 percent to 4.493 percent, continuing its downward trend. The Indian rupee depreciated sharply by 1.25 percent to close at 87.59 per dollar, recording its steepest weekly drop in years.

8. IPO Market Activity

Next week will witness nine IPO launches, including three mainboard offerings. Ajax Engineering’s ₹1,269-crore IPO opens on February 10, followed by Hexaware Technologies’ ₹8,750-crore issue on February 12, and Quality Power

Electrical Equipment’s offering on February 14. The SME segment will also see IPOs from Chandan Healthcare, PS Raj Steels, Voler Car, Maxvolt Energy Industries, LK Mehta Polymers, and Shanmuga Hospital.

9. Technical Outlook & Derivatives Data

The Nifty 50 is expected to consolidate as long as it stays below 23,800, which serves as a key resistance level for a potential rally towards the 24,000–24,200 range. Support is positioned at 23,400 (50-week EMA) and 23,250 (last week’s low).

The index formed a bullish candlestick pattern on the weekly chart, indicating buying interest, though pressure remains at higher levels. Breaking below 23,250 could disrupt the higher-top, higher-bottom formation. Options data suggests a trading range of 23,000–24,000 in the upcoming week, with significant open interest seen at the 24,000 strike on the Call side and 22,600 on the Put side.

10. Market Volatility

The India VIX, a measure of market volatility, remained supportive for bulls, declining 2.91 percent to 13.69 over the past week, following a 15.83 percent drop in the prior week. It now sits below key moving averages, reflecting reduced market uncertainty.