RBI policy meet, US tariff, among key triggers for market next week

Mumbai, Aug 3 Indian equity markets are set for a critical week as a mix of domestic and global triggers weigh on investor sentiment.

After experiencing selling pressure for the past few sessions, markets remain under pressure from rising global risks, weak corporate earnings, and persistent FII outflows.

The Sensex fell 0.72 per cent to 80,599.91 on Friday, while the Nifty 50 fell 0.82 per cent to close at 24,565.35. For the week, both benchmarks fell 1.1 per cent, resulting in five weeks of losses, the longest losing run in two years.

With the decision due on August 8, all eyes will be on the RBI's monetary policy meeting, which is scheduled for August 4-6. A 25-basis-point rate cut is anticipated to boost credit expansion before the holiday season.

A significant increase in the value of the US dollar put additional strain on emerging markets globally.

Last week, the dollar index saw its biggest weekly gain in almost three years, rising 2.5 per cent to surpass the 100 mark. A stronger dollar has made borrowing more expensive and sparked worries about capital flight.

Over Rs 27,000 crore has been taken out by foreign institutional investors in nine sessions, including Rs 5,588.91 crore on Thursday alone. With the long-to-short ratio falling to 0.11 and short interest in index futures reaching 90 per cent, bearish wagers have increased.

The pressure has increased due to the weak Q1 earnings. Major banks have reported modest profit growth, which has kept overall sentiment muted, and the Nifty IT index has fallen 10 per cent in the last month.

Notably, the US has imposed a 25 per cent tariff on India. It has also imposed an additional unspecified penalty for India's trade with Russia for defence equipment and crude oil, affecting the market sentiment.

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