India’s foreign exchange reserves rose by $2.48 billion during the week ended Nov.29, official data showed. According to the Reserve Bank of India’s weekly statistical supplement, the overall forex reserves increased to $451.08 billion from $448.59 billion reported for the week ended November 22.

India’s forex reserves comprise foreign currency assets (FCAs), gold reserves, special drawing rights (SDRs) and India’s reserve position with the International Monetary Fund (IMF).

On a weekly basis, FCAs, the largest component of the forex reserves, edged higher by $2.64 billion at $419.36 billion.

However, the RBI’s weekly data showed that the value of the country’s gold reserves went down by $148 million to $26.64 billion.

Similarly, the SDR value inched down by $4 million to $1.43 billion, while, the country’s reserve position with the IMF declined by $6 million to $3.62 billion.

Macro-economic data points along with the direction of foreign fund flows and US Fed’s monetary policy are expected to influence the Indian equity market’s trajectory next week, analysts opined.

Additionally, the rupee’s movement against the American dollar and the progress of US-China trade deal as well as crude oil price fluctuations will impact investors’ risk-taking appetite.

“The major trend which is developing is a rally in the commodity markets, especially metals.”

“The US dollar has begun to see overhead supply, EU economic data is improving. A phase 1 US-China trade deal and dovish US Fed may make this trend more visible,” Edelweiss Professional Investor Research’s Chief Market Strategist Sahil Kapoor told IANS.

“As suggested earlier, Nifty has entered a consolidation phase which played out last week. It now seems that fresh upmove may begin as we enter deeper into December month.”

In terms of macro-data, investors will look forward to the release of industrial production, retail and wholesale inflation figures next week.

These data points hold significance as the Reserve Bank in its last monetary policy kept lending rates intact thereby prioritising rising inflation over grim economic growth.

Next week, the National Statistics Office is slated to release the macro-economic data points of Index of Industrial Production and Consumer Price Index on Dec.12, followed a day later by Wholesale Price Index and India’s November trade figures.

“We expect the inflation to remain close to or above 5 per cent by March 2020, which means that a rate cut in the next MPC in February 2020 is highly unlikely,” Motilal Oswal Financial Services’ Retail Research Head Siddhartha Khemka said.

“We continue to maintain that there will be no more rate cuts unless inflation falls back towards 4 per cent. Thus there is a good probability of a prolonged pause over the next 3-4 quarters.”

Apart from macro-data economic data points, rupee’s movement against the US dollar will influence investors’ sentiments.

According to Sajal Gupta, Head Forex and Rates, Edelweiss Securities, unlike last week the rupee might not exhibit any further strength.

The Indian currency is expected to range from 71.10-71.80, next week from its previous close of 71.1950.

In addition, technical charts showed that National Stock Exchange’s Nifty50 entered into an ‘Engulfing Bear’ candle formation suggesting bearishness.

“Last hope for bulls is placed at 11,880, if index breaches that level then further lower levels is possible in the index,” HDFC Securities’ Retail Research Head Deepak Jasani said.

“On failure to do this, index may show positive or sideways movements in the next week.”

Meanwhile the Reserve Bank of India (RBI) kept its key lending rate on hold in a shock decision that spooked markets on Thursday, even as it slashed its growth forecast for the economy to its lowest level in over a decade.

The RBI’s monetary policy committee (MPC) had been widely expected to deliver its sixth interest rate cut of the year. Instead, the six-member panel unanimously voted to hold the key repo rate at 5.15% while the reverse repo rate was also held at 4.90 per cent.

“I cannot remember the last time there has been such a resounding surprise as far as the RBI decision is concerned. It defies the expectation of the market and also the body language of the central bank over the last six months,” said Taimur Baig, chief economist at DBS Group Research.

Bond yields spiked and equities fell after the decision. Explaining its decision, the MPC said it was concerned about inflation in the near term, while acknowledging there is room to cut rates further.

Agencies