What lies ahead for Indian markets next week? Ajay Bagga answers

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“We are back to sanity and we are looking at two to three rate cuts by December. So, this dot plot will be very critical and I think that is the market moving theme next week,” says Ajay Bagga, Market Expert.

Because we saw that the reason was of course majorly dominated because of the midcap and smallcap and also a macro reason is also there which is worrying markets. Ahead of us is the Fed meeting next week where we would also look for some comments. Global markets will take direction from the comments here and what do you think lies ahead for Indian markets also? Any respite coming for small and midcap sectors?

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Yes, definitely the market moving event will be on Wednesday when the Fed policy comes out and basically it will be the fifth pause in a row but what will be critical is the commentary and especially the dot plot.

So, their view on the GDP growth, on inflation and the timing of the rate cut and how many rate cuts are they seeing. So, the dot plot will give us an idea of that.

The market had seen the December dovish policy as a big move up and from three rate cuts markets had factored in six rate cuts this year.

Now, we are back to sanity and we are looking at two to three rate cuts by December. So, this dot plot will be very critical and I think that is the market moving theme next week.In terms of India, it is more the amount of regulatory communication, regulatory action that led to small selloff, but we have done very well as a market and especially in the midcap and smallcap segments, we have had very good returns.So, some steam being let off, nothing much to worry about and it might continue for a couple of months now, elections getting announced over the weekend and so till the new government comes in you might see a sideways market, but I do not foresee too much of a risk in these markets.

It is definitely not a bubble though it is at higher valuations than 10-year averages, but it has not reached bubble territories and this correction has been good for the markets.

It has shaken out weak hands. There is a lot of liquidity sitting on the sidelines waiting to enter both from the foreign flows as well as domestic savings. So, we are not expecting a very big selloff here in the markets and we could actually see a recovery as early as next week.

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