Domestic stock markets are expected to witness heightened volatility in the coming week, as investors closely track the upcoming monetary policy decision of the Reserve Bank of India, along with key global economic indicators and ongoing developments in the West Asia conflict, analysts said.
They added that fluctuations in crude oil prices and trends in foreign fund flows will also play a crucial role in shaping market direction.
Vinod Nair, Head of Research at Geojit Financial Services, said the meeting of the RBI’s Monetary Policy Committee (MPC) will be the primary domestic trigger, with investors keenly watching the central bank’s stance on inflation and economic growth.
He noted that a pause in interest rates is widely expected, as the RBI balances rising inflation risks driven by elevated crude oil prices against signs of slowing growth, including a four-year low in Manufacturing PMI. Market participants will also closely analyse the governor’s commentary on the future rate cycle and projections for FY27.
On the global front, Nair highlighted the importance of the US March CPI data, which could dampen lingering expectations of rate cuts by the Federal Reserve, strengthen the dollar, and tighten financial conditions for emerging markets such as India.
He further emphasised that geopolitical developments in West Asia will remain the dominant factor influencing sentiment. With Indian markets reopening after a three-day break, they are particularly sensitive to any escalation in the conflict over the weekend. According to him, crude oil price trends and any credible signs of a ceasefire could either trigger a sharp relief rally or prolong the current ‘sell-on-rise’ trend.
In the previous holiday-shortened week, benchmark indices ended lower, with the BSE Sensex falling 263.67 points (0.35 per cent) and the NSE Nifty declining 106.5 points (0.46 per cent).
Siddhartha Khemka, Head of Research (Wealth Management) at Motilal Oswal Financial Services, also expects continued volatility, with investor sentiment closely tied to developments in the West Asia situation.
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He pointed out that Brent crude prices remain elevated at around USD 107 per barrel, keeping concerns about imported inflation alive. Meanwhile, the rupee has faced pressure, weakening sharply before recovering toward ₹93 against the US dollar, supported by intervention from the RBI.
Foreign institutional investor (FII) selling remains a significant concern, with March witnessing heavy outflows of nearly ₹1.2 lakh crore—among the highest monthly withdrawals in recent years.
Khemka added that investors will monitor key global cues, including the minutes of the Federal Open Market Committee, GDP data, and initial jobless claims for further clarity on economic growth and policy direction.
Overall, analysts believe markets will remain sensitive to multiple factors, including geopolitical developments, crude oil price movements, FII flows, and global macroeconomic data.
They also noted that any signs of de-escalation in the West Asia conflict could provide relief through softer crude prices and a more stable currency. Conversely, further escalation may prolong risk aversion and continue to exert pressure on foreign investment flows.
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