Stock market this week: Union Budget, RBI policy, macro data to be in focus

The share market is expected to remain volatile in this eventful week given the major events - Union Budget followed by RBI policy meet - which may set the market direction in near term. Besides, macro data, ongoing corporate earnings season and global market performance would also impact stock market trading this week.

The Indian benchmark indices witnessed sharp correction last week as investors resorted to profit booking ahead of the Union Budget 2021. The BSE Sensex fell over 5 per cent, the highest weekly decline since March last year, amid weak global trends and surge in foreign fund outflows as foreign investors turned cautious ahead of Finance Minister Nirmala Sitharaman's Budget speech in Parliament on February 1.

Last week, the 30-share BSE benchmark Sensex declined 2,592.77 points or 5.30 per cent as investors resorted to profit-booking ahead of the Budget, with domestic equity market continuing its downward journey for the sixth session in a row on Friday. In last six sessions, Sensex lost 3,506.35 points or 7.04 per cent, while Nifty declined 1,010.10 points or 6.89 per cent. In pre-Budget sell-off, the market wiped out Rs 11.58 lakh crore in investor wealth. On January 20, market cap on BSE stood at Rs 197.70 lakh crore which fell to 186.12 lakh crore on January 29.

Also Read: Union Budget 2021: Share market expectation on Budget Day; key factors that will guide D-Street

Here are the key factors that will lead the stock market this week:

Union Budget 2021: Finance Minister Nirmala Sitharaman is set to present Union Budget 2021 on February 1, 2021, amid hopes that she would take a balance between populism, reform and growth under a weak fiscal position.

According to Vinod Nair, Head of Research at Geojit Financial Services, Union Budget will be the key to add strength in the domestic market to perform better compared to the rest of the world. "The risk is that expectations are high that the government will find a balance between populism, reform and growth under a weak fiscal position. Auto stocks can remain in focus as investors will keep an eye on sales in the month of January post a strong December. The global market will be watchful on any regulatory actions which may be taken given the recent speculation issue, doubting the efficient working of the market system," he said.  

RBI Policy Review:  The Dalal-Street will keep a close eye on the RBI Monetary Policy Committee (MPC) meet this week which will drive domestic market sentiments. The three-day meeting of Monetary Policy Committee, the panel which sets the key interest rates, will start on February 3 and conclude on February 5. As per market experts, the central bank is expected to maintain status quo and keep the monetary stance accommodative at the policy review though it will take guidance from the Budget to be unveiled on February 1.

Auto Sales: Auto stocks will remain in focus after December auto sales numbers by index heavyweights Maruti, M&M and Hero MotoCorp reported a solid growth.  Auto companies delivered better-than-expected volumes in December amid strong demand even after the festival season.

Macro Data: PMI data for the manufacturing and services sector is also lined up this week. While manufacturing PMI will be released on February 1, services PMI will be out on February 3.  

Global Cues: Traders will also keep a track on macroeconomic data by the US. The world's largest economy will release PMI data followed by factory orders, balance of trade, jobless claims during the week.

FIIs Flow: The foreign investors turned net sellers last week amid weak global cues and concerns regarding Budget outcome. The FIIs sold Rs 12,096.69 crore worth of shares in the week ended January 29. In contrast, domestic institutional investors turned net buyers with net purchasing of Rs 3,788.98 crore of shares last week.

Corporate Earnings: Over 470 companies are slated to release their earnings for the December quarter. Investors will keep an eye on major stocks such as HDFC, Bharti Airtel, Hero Motocorp, HPCL, State Bank of India, Britannia Industries, Mahindra & Mahindra and NTPC, who will unveil their earnings this week.

Also Read: Pre-Budget sell-off: Investors lose Rs 11.58 lakh crore as Sensex falls 3,500 points in six days

Also Read: Sensex at 50,000: What happens next?