Daljeet Kohli: Crude Prices, FII Flows, and Rate Hike Trajectory Are the Three Market Triggers to Watch

• Market strategist Daljeet Kohli identifies crude oil prices, FII flow trends, and the RBI rate path as the three primary triggers for Indian equities.
• The RBI's calibrated tightening stance leaves room for additional hikes, maintaining elevated uncertainty for valuation-sensitive sectors.
• Corporate earnings momentum and rupee stability will determine whether the market digests the tightening cycle constructively.

The RBI's decision to raise the repo rate to 5.50% and adopt a calibrated tightening stance has prompted a detailed reassessment of the Indian equity market's near-term trajectory. Market veteran Daljeet Kohli frames the outlook around three interlocking variables. First, crude oil prices: India's heavy dependence on imported oil means that every dollar increase in Brent crude directly widens the trade deficit, weakens the rupee, and elevates domestic inflation—all of which constrain the RBI's ability to pause tightening. With crude above $100, the fiscal arithmetic remains challenging for policymakers.

Second, foreign institutional investor flows will be a critical determinant of whether domestic market liquidity can absorb rate-driven selling pressure. The narrowing spread between Indian and US risk-free rates has already reduced the carry trade attractiveness of Indian equity exposure for global portfolios. If the Fed continues tightening and the RBI matches pace only partially, the differential compression will persist as a structural FII outflow driver. Conversely, any indication that the US rate cycle is near its terminal rate could trigger a sharp reversal of FII flows into Indian markets.

Third, the corporate earnings trajectory over the next two quarters will test whether India's fundamental growth story remains intact. Kohli's framework suggests that sectors with strong pricing power and low debt—technology services, select consumer staples, and infrastructure companies with government-backed order books—will outperform during the tightening phase. Highly leveraged companies, interest-rate-sensitive financials, and discretionary consumption names are most exposed to downside risk. Earnings season guidance will be the clearest signal of how Indian corporate managements are navigating simultaneous headwinds.

Source: Zee Business / ET Markets