Inflation Data, FII Flow, Trump Tariffs, and Global Cues to Watch This Week

The Indian stock market broke its three-week losing streak, posting a strong rebound fueled by positive global and domestic developments, particularly surrounding US tariff-related updates. This renewed optimism among investors on Dalal Street.

In the upcoming week, market participants will keep a close watch on several key factors. Retail inflation data, announcements from former US President Donald Trump regarding tariffs, fluctuations in the rupee-dollar exchange rate, foreign fund flows, and both domestic and global macroeconomic indicators will play a crucial role in shaping market sentiment.

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The benchmark indices, Sensex and Nifty 50, witnessed a notable recovery, primarily driven by short covering. As these indices neared critical support levels, traders and investors chose to unwind their bearish positions.

This week, the Nifty 50 recorded a 1.9% gain, marking its strongest weekly performance in three months, while the Sensex rose by 1.6%, achieving its best weekly gain since the end of January. The broader market displayed resilience, with mid-cap and small-cap indices climbing approximately 2.6% and 5.5%, respectively.

Although the domestic market has rebounded from oversold levels, a sustainable uptrend will depend on corporate earnings recovery and reduced uncertainty regarding tariffs. "The premium valuations of broader indices may limit a widespread market rally in the short term, while large-cap stocks appear more attractive," said Vinod Nair, Head of Research at Geojit Financial Services.

Limited IPO Activity in the Primary Market

The primary market is expected to see subdued activity, with no new initial public offerings (IPOs) scheduled on the mainboard. However, two SME IPOs will open for subscription. Additionally, a new SME listing is set to debut on either the BSE SME or NSE SME platform this week.

Key Market Triggers for the Week Ahead

Inflation Data

On the macroeconomic front, investors will focus on the release of the Consumer Price Index (CPI) inflation data and the Index of Industrial Production (IIP). Analysts from the Union Bank of India suggest that food inflation likely fell below 5% for the first time since June 2023. Furthermore, India's retail inflation is estimated to have dropped below 4% in February 2025, primarily due to declining vegetable prices.

Foreign Institutional Investors (FII) Activity

Foreign institutional investors (FIIs) recorded net outflows of ₹15,501 crore in the cash segment, whereas domestic institutional investors (DIIs) injected ₹20,950 crore, helping stabilize the market.

“The trend of FII selling in India persisted into early March, but there are indications that the intensity of outflows has slightly eased in recent days,” noted Dr. V.K. Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

Meanwhile, Chinese equities attracted buying interest due to attractive valuations and recent pro-business initiatives by the Chinese government. However, this is likely a short-term cyclical trend, as Chinese corporate earnings have consistently underperformed since 2008.

According to Vaibhav Porwal, Co-Founder of Dezerv, FII outflows indicate broad-based selling, with consistent offloading over the past six months. The Indian market is undergoing a correction, with major indices declining by approximately 11% to 25%.

Higher US bond yields, which offer stability without the volatility and currency risks associated with emerging market equities, have also impacted FII decisions. Additionally, a 3% depreciation in the Indian rupee has further eroded returns for foreign investors, prompting them to reallocate funds to markets such as China, the US, and Brazil, where they find better valuation opportunities.

Global Market Trends

Global sentiment improved following reports of a delay in US tariffs and the potential for further negotiations, which helped stabilize financial markets. A weaker US dollar and falling crude oil prices also contributed to improved investor confidence.

In the coming week, key global factors to watch include updates on US tariff negotiations, geopolitical developments, and their impact on currency movements and crude oil prices.

"A decline in the dollar index has boosted investor sentiment toward emerging markets, while uncertainty around Trump’s economic policies has weighed on US equities," said Vinod Nair from Geojit.

"The tariffs, initially enacted, were later delayed, creating uncertainty among investors. Market participants will closely watch US payroll data and inflation figures for further clues on interest rate direction," Nair added.

Oil Market Trends

International crude oil prices experienced fluctuations in the previous session, initially rising before retreating from intraday highs. This was triggered by US President Donald Trump’s warning of potential sanctions on Russia if it fails to negotiate a cease-fire with Ukraine. The prospect of a temporary truce in Ukraine moderated the impact of tariff-related market volatility.

Brent crude futures settled at $70.36 per barrel, up 90 cents or 1.3%, while US West Texas Intermediate (WTI) crude closed at $67.04, increasing by 68 cents or 1.02%. However, for the week, Brent declined 3.8%, marking its biggest weekly drop since mid-November, while WTI recorded a 3.9% decline—its steepest weekly fall since late January.

Corporate Actions

Several stocks, including Bharat Electronics Ltd, G R Infraprojects Ltd, and Housing & Urban Development Corporation Ltd, will trade ex-dividend starting Monday, March 11. Additionally, a few stocks are set to trade ex-split and ex-bonus this week.

Technical Outlook

From a technical perspective, the Nifty 50 faces resistance near its 20-day Exponential Moving Average (DEMA) at around 22,700. A decisive close below 22,250 could halt the recovery and push the index toward a retest of the critical support level at 22,000.