Fed meet, inflation numbers key drivers for markets this week

Trading in the stock market this week would be influenced by inflation data and outcome of the key US Federal Reserve rate decision, with stocks likely to witness volatility in the near term, say experts.

"Inflation data and US Fed action will dominate action this week. We expect the downside bias to continue in Indian equities," said Ravi Shenoy, AVP-Midcaps Research, Motilal Oswal Securities Ltd.

Inflation data for November based on the wholesale price index (WPI) and the consumer price index (CPI) will be out on Monday.

Stock markets on Monday may also react to IIP data, which came post market hours on Friday.

In a robust turnaround, industrial output grew at a five- year high rate of 9.8% in October on impressive performance of capital and consumer goods, possibly driven by Diwali season demand.

"Monetary policy decision by the US Federal Reserve, macroeconomic data and trend in global markets will dictate trend on the bourses this week. On the domestic front, the non-functioning Parliament is an added concern. Investors' focus is on whether the GST Bill will be passed," said Vijay Singhania, Founder-Director, Trade Smart Online.

"Considering the GST Bill and upcoming Fed policy meet, we continue to hold our negative view on Nifty and expect volatility to touch newer highs in the coming week."

On the global front, investors will keenly watch the outcome of the US Fed's two-day meeting scheduled for Tuesday and Wednesday.

"Federal Reserve's two-day policy meet starts from Tuesday and globally, investors in emerging markets, including India, are worried that once the Fed starts raising interest rates, it will drain liquidity from global emerging markets and redirect it to developed economies," said Singhania.

Meanwhile, continuing with their selling spree, foreign investors have pulled out nearly Rs 5,500 crore from stock markets since the beginning of December.

The latest sell-off comes after foreign portfolio investors (FPIs) withdrew Rs 7,074 crore from the equities last month.

Over the past week, the BSE benchmark Sensex fell by 593.68 points, or 2.31%, to 25,044.43.