US Fed interest rate decision, earnings likely to drive markets this week

The US Fed interest rate decision, trading activity of foreign investors and quarterly earnings from corporates would largely drive the momentum in the equity market this week, analysts said.

Escalating tensions between India and Pakistan over the Pahalgam terror attack will also remain on investors' radar, they added.

Optimism over a potential trade agreement with the US and sustained FII (Foreign Institutional Investors) inflows helped markets end the last week on a positive note. But market experts said that due to the fragile global environment amid geopolitical tensions and the ongoing tariff war, investors are not betting big on equities. 

Among macroeconomic data announcements this week, HSBC services PMI (Purchasing Managers' Index) would be watched by investors.

"This week is crucial, packed with key domestic and global triggers. Developments regarding tariff and geopolitical tensions with Pakistan will remain on the radar. On the macroeconomic front, investors would be eyeing the HSBC composite PMI and services PMI data. While on the global front, Fed interest rate decision is due on 7th May," Ajit Mishra SVP, Research, Religare Broking Ltd, said.

On the corporate earnings front, prominent companies including M&M, Coal India, Asian Paints, Larsen & Toubro and Titan would announce their quarterly results during the week.

Globally, updates related to tariffs and trade will also be watched closely, he added.

Last week, the BSE benchmark jumped 1,289.46 points or 1.62 per cent, and the NSE Nifty climbed 307.35 points or 1.27 per cent.

Concerns over a potential US recession and ongoing border tensions between India and Pakistan also weighed on market mood, Gaurav Garg, Analyst, Lemonn Markets Desk, said.

"Domestic markets are expected to remain cautious in the near term amid ongoing geopolitical tensions, although a sharp correction is not currently anticipated. Globally, easing trade tensions between the US and China, coupled with a weakening US dollar, are seen as medium-term positives for emerging markets such as India.

"However, the recent decline in Q1 US GDP growth adds a layer of uncertainty. In this context, upcoming comments from the Federal Reserve Chair on interest rates and inflation during this week's FOMC (Federal Open Market Committee) meeting will be closely watched and could significantly influence market direction," Vinod Nair, Head of Research, Geojit Investments Limited, said.

FIIs have been sustained buyers during the last 12 trading days.

This is a major pivot in FII strategy, VK Vijayakumar, Chief Investment Strategist, Geojit Investments Limited, said.

"There are two major factors behind this reversal of FII strategy. One, President Trump's announcement of a 90-day pause in reciprocal tariffs led to recovery in global equity markets. In this recovery India outperformed. Two, weakness in the dollar, halted and reversed the momentum trade towards US witnessed after Trump's victory in the elections. The steep decline in the Dollar index from 111 on 11th January to 99 recently facilitated FII inflows to emerging markets, particularly India," he added.

Meanwhile, State Bank of India on Saturday reported an 8.34 per cent decline in its consolidated net profit to Rs 19,600 crore for the January-March quarter compared to Rs 21,384 crore a year ago, impacted by a decline in net interest margins.

"Overall, we expect the market to consolidate in a broad range with a positive bias. Stock-specific action is likely to dominate the market, although some volatility may be expected due to geopolitical tensions," Siddhartha Khemka, Head - Research, Wealth Management, Motilal Oswal Financial Services Ltd, said.