Global Tensions & Market Volatility: What to expect in this week’s trading
Ashish Pandey
Founder & CEO, ASP Finserv | Volatility Coach | Pioneering Intelligent Wealth Solutions | Derivatives & Portfolio Expert | Fintech Innovator
As we enter the new trading week, I anticipate heightened volatility in the Indian markets, primarily driven by global geopolitical developments rather than domestic events.
After witnessing a robust recovery last week—the Nifty settled at 22,552.50, and the Sensex closed at 74,332.58, marking nearly 2% gains—the market's direction now hinges on several critical global factors.
Breaking the Losing Streak
The past week marked a significant turnaround for Indian equities, snapping a three-week losing streak.
The Nifty 50 rose 1.9%, its best performance in three months, while the Sensex gained 1.6%, logging its highest weekly gains since January-end.
The broader market demonstrated remarkable resilience, with small-cap and mid-cap indices gaining approximately 5.5% and 2.6%, respectively.
This recovery was largely fueled by favorable global and domestic cues, particularly reports of potential delays in U.S. tariff implementations and the possibility of further negotiations.
Additionally, a weaker dollar and declining crude oil prices helped boost investor confidence.
Critical Global Triggers to Monitor
Tariff Negotiations and Their Implications
The ongoing tariff discussions, particularly those related to the United States, represent a key market mover.
Last week's market recovery was partially attributed to reports of potential delays in U.S. tariff implementation.
However, the situation remains fluid, with initial tariffs being enacted and subsequently delayed, creating uncertainty that investors must navigate carefully.
Geopolitical Tensions
Recent developments in Ukraine warrant close attention. U.S. President Donald Trump has threatened sanctions on Russia if it fails to reach a cease-fire with Ukraine.
This geopolitical tension has already impacted oil prices, with Brent crude futures settling at $70.36 a barrel (up 1.3%) and WTI futures at $67.04 (up 1.02%) in the previous session.
For the week, however, Brent was down 3.8%—its biggest weekly decline in nearly four months—while WTI finished down 3.9%.
Currency Movement and Crude Oil Dynamics
The movement of the U.S. dollar and international crude oil prices will significantly influence market sentiment.
A weaker dollar typically benefits emerging markets like India, while lower crude oil prices reduce import bills and inflationary pressures for oil-dependent economies.
Domestic Economic Indicators
Inflation and Industrial Production Data
Market participants will closely monitor the release of Consumer Price Index (CPI) inflation data and the Index of Industrial Production (IIP) this week.
Based on preliminary analysis, food inflation likely fell below 5% for the first time since June 2023. India's retail inflation is expected to slow down further in February 2025, potentially falling below the 4% mark primarily due to declining vegetable prices.
FII Activity and Capital Flows
Foreign Institutional Investors (FIIs) have slowed their cash market sales, but any shift in their stance will remain a crucial indicator for market direction.
In early March, FIIs recorded net outflows of ₹15,501 crore in the cash segment, whereas Domestic Institutional Investors (DIIs) injected ₹20,950 crore, providing stability to the market.
The recent six-month trend of FII outflows signals consistent selling, contributing to the market correction across significant equity indices (approximately 11-25% declines).
Multiple factors have influenced this capital reallocation:
These factors have incentivized FIIs to reallocate investments toward markets offering better perceived value or returns.
Global Economic Calendar
Several key economic data releases from China, India, and the United States could influence global markets this week:
With significant inflation data from all three nations, global markets may face volatility, especially in interest rate-sensitive sectors, as investors assess potential central bank actions and economic growth trends.
Sector Outlook
Investor sentiment is expected to remain cautious, with defensive sectors and large caps likely outperforming in the near term.
Consumer, banking and financial services, and metal sectors should remain in focus.
While some reversal trends have been observed in broader markets, concerns regarding earnings downgrades and expensive valuations persist, making investors cautious.
The premium valuation of broader indices may restrict a broad-based market recovery in the short run, while large caps appear more attractive at current levels.
Technical Perspective
From a technical standpoint, the Nifty 50 faces a crucial hurdle at its 20-day Exponential Moving Average (DEMA) near 22,700. A close below 22,250 may stall recovery, potentially leading to a retest of the support zone near 22,000.
Market Holiday
Note that the Indian stock market will be closed on Friday, March 14, for the Holi festival, making it a shortened trading week.
Closing Thoughts
The coming week presents a complex trading environment dominated by global factors and macroeconomic data releases.
While the market has demonstrated resilience by recovering from oversold conditions, a decisive upward momentum will depend on corporate earnings recovery and the resolution of tariff uncertainties.
Investors should maintain a balanced approach, focusing on quality companies while remaining vigilant about evolving global scenarios that could impact market direction.