# Indian Market Event Patterns

Historical patterns of how Indian markets react to major events. Use these as reference points — not predictions — when building scenarios.

## RBI Monetary Policy

### Rate Cut
- **Immediate**: Banks rally 1-3%, rate-sensitive sectors positive
- **1-3 months**: Housing finance, auto, real estate benefit from cheaper loans
- **Caveat**: If cut is smaller than expected, market may sell off despite the cut

### Rate Hike
- **Immediate**: Banks mixed (NIM expands but growth fears), IT neutral
- **1-3 months**: NBFCs, housing finance under pressure; PSU banks may benefit from NIM
- **Caveat**: If hike is "last in cycle," markets often rally

### RBI Policy Hold (Pause)
- **Immediate**: Muted reaction if expected; relief rally if hike was feared
- **Key**: Tone matters more than action (hawkish pause vs dovish pause)

## Union Budget

### Capex Increase Announcement
- **Immediate**: Infra, capital goods, cement rally 3-5%
- **Beneficiaries**: L&T, Ultratech, ABB, Siemens, BHEL
- **Duration**: Capex-led rallies last 2-4 weeks typically

### Tax Changes
- **Income tax relief**: Consumer, FMCG, auto, discretionary spending
- **Corporate tax cut**: Broad market rally, financials lead
- **Capital gains tax hike**: Immediate sell-off, typically 2-5% correction

### Disinvestment
- **PSU stocks**: Rally on divestment target announcement, fade on execution delays
- **Historical pattern**: Targets frequently missed, leading to PSU underperformance in H2

## Crude Oil Shock

### Crude Up >10%
- **Immediate**: OMCs (BPCL, HPCL, IOC) drop 3-8%; Airlines (IndiGo) drop
- **2nd order**: Paints, chemicals under input cost pressure
- **3rd order**: Current account deficit widens → INR weakens → IT benefits
- **Pattern**: Nifty typically corrects 3-5% on sustained crude above $90

### Crude Down >10%
- **Immediate**: OMCs, airlines, paints rally; Oil producers (ONGC) fall
- **Positive chain**: Lower inflation → RBI rate cut expectations → rate-sensitive rally

## Global Risk-Off Events

### US Recession Fears
- **FII selling**: ₹3,000-10,000 crore/day outflows possible
- **Sectors hit**: IT (revenue fears), metals (demand fears)
- **Safe havens**: FMCG, pharma, utilities
- **Pattern**: DII buying (SIPs) provides floor but can't prevent 10-15% corrections

### US Fed Rate Decision
- **Rate hike**: INR weakens, FII outflows; IT sector benefits from weak INR
- **Rate cut**: Emerging market flows → FII inflows → Nifty rally
- **Dot plot matters**: Forward guidance more important than actual decision

## India-Specific Events

### General Elections
- **Pre-election (3 months)**: Uncertainty, range-bound market
- **Election result (BJP/NDA win)**: 3-8% rally, infra and PSU stocks lead
- **Hung Parliament**: 5-10% correction, defensive sectors outperform
- **Historical**: Markets have rallied post-election regardless of winner (75% of time)

### Monsoon
- **Good monsoon forecast**: Agri inputs (fertilizers, pesticides), rural consumption, two-wheelers
- **Poor monsoon**: FMCG rural demand impact, food inflation → RBI tightening risk
- **Pattern**: Monsoon impact is gradual (June-September), not a single-day event

### India-China Tensions
- **Immediate**: Broad market sell-off 2-4%, defense stocks rally
- **Beneficiaries**: BEL, HAL, BDL on defense spending expectations
- **Pattern**: Market recovers within 2-4 weeks unless escalation continues

## Corporate Events

### Major Earnings Surprise (>10% Beat)
- **Immediate**: Stock gaps up 5-15%
- **Sector effect**: Peers rally in sympathy (e.g., INFY beat → WIPRO, TCS rally)
- **Duration**: Momentum continues for 2-4 weeks if accompanied by guidance raise

### Promoter Pledge Increase
- **Signal**: Negative — indicates financial stress at promoter level
- **Pattern**: Stock typically declines 5-15% over following month
- **Red flag level**: Pledge >50% of holdings is severe risk

### SEBI Enforcement Action
- **Target company**: Sharp decline, potentially multi-day lower circuits
- **Sector contagion**: Limited unless systemic (e.g., Adani event affected all Adani group + broader market sentiment)

# Scenario Playbooks — Indian Markets

Templates for building structured scenarios from headlines. Follow the MECE principle: scenarios must be Mutually Exclusive and Collectively Exhaustive (probabilities sum to 100%).

## Scenario Construction Template

### Structure
```
Scenario: [Name]
Probability: [X]%
Timeline: 18 months, divided into 3 phases

Phase 1 (0-6 months): [What happens immediately]
Phase 2 (6-12 months): [How it evolves]
Phase 3 (12-18 months): [End state]

Key Assumptions:
- [What must hold true for this scenario]
- [External conditions required]

Triggers to Watch:
- [What would increase this scenario's probability]
- [What would decrease it]
```

### Probability Distribution Guidelines

| Market Consensus | Base Case | Bull Case | Bear Case |
|-----------------|-----------|-----------|-----------|
| Strong consensus | 50-60% | 20-30% | 15-25% |
| Divided views | 35-45% | 25-35% | 25-35% |
| High uncertainty | 30-40% | 25-35% | 30-40% |

## Playbook 1: RBI Policy Decision

### Base Case (50%): Gradual Easing
- Phase 1: 1-2 rate cuts of 25 bps each
- Phase 2: Transmission to lending rates, credit growth picks up
- Phase 3: GDP acceleration, corporate earnings growth
- Nifty impact: +8-12% over 18 months
- Beneficiaries: Banks, auto, realty, consumer discretionary

### Bull Case (25%): Aggressive Easing
- Phase 1: 50 bps cut + liquidity measures
- Phase 2: Strong credit growth, housing boom
- Phase 3: Capex cycle revival, broad-based rally
- Nifty impact: +15-25% over 18 months
- Beneficiaries: Rate-sensitive sectors, mid/small-caps

### Bear Case (25%): Policy Reversal
- Phase 1: Inflation surprise forces pause or reversal
- Phase 2: Global tightening spills over, INR pressure
- Phase 3: Stagflation risk, earnings downgrades
- Nifty impact: -5-15% over 18 months
- Defensive: Pharma, IT, FMCG

## Playbook 2: Global Risk-Off Event

### Base Case (45%): Contained Impact
- Phase 1: FII outflows ₹20,000-40,000 crore over 2-3 months
- Phase 2: DII absorption, market stabilizes 10% below peak
- Phase 3: FII returns as India growth story intact
- Nifty impact: -10-15% correction, full recovery in 12-15 months

### Bull Case (25%): India Decoupling
- Phase 1: Initial sell-off 5-8%, quick recovery
- Phase 2: India seen as relative safe haven among EMs
- Phase 3: Premium valuation, FII flows accelerate
- Nifty impact: Flat to +5% over 18 months

### Bear Case (30%): Contagion
- Phase 1: FII outflows >₹1 lakh crore, Nifty drops 15-20%
- Phase 2: INR depreciation >5%, imported inflation, RBI forced to tighten
- Phase 3: Earnings downgrades, PE de-rating
- Nifty impact: -20-30% over 18 months

## Playbook 3: Crude Oil Spike

### Base Case (45%): Temporary Spike
- Phase 1: Crude at $90-100, OMC margins compressed
- Phase 2: OPEC+ responds, prices stabilize
- Phase 3: Gradual normalization to $75-85
- Nifty impact: -5-8% correction, recovery in 6 months

### Bull Case (25%): Quick Resolution
- Phase 1: Brief spike above $90, then rapid decline
- Phase 2: Crude settles below $80
- Phase 3: India benefits from lower input costs
- Nifty impact: Brief -3% dip, then +5-10% rally

### Bear Case (30%): Sustained High Prices
- Phase 1: Crude sustained above $100 for 3+ months
- Phase 2: Current account deficit widens, fiscal pressure
- Phase 3: RBI tightens, growth slows
- Nifty impact: -15-20% over 18 months

## Playbook 4: Union Budget

### Base Case (50%): Continuity Budget
- Phase 1: Capex maintained/increased, fiscal discipline continued
- Phase 2: Infrastructure spending flows to order books
- Phase 3: GDP growth sustained at 6.5-7%
- Nifty impact: Neutral to +5% over 6 months

### Bull Case (30%): Reform Budget
- Phase 1: Major tax reforms + capex increase + disinvestment push
- Phase 2: Corporate earnings upgrade cycle
- Phase 3: India valuation re-rating
- Nifty impact: +10-15% over 12 months

### Bear Case (20%): Populist Budget
- Phase 1: Fiscal slippage, populist spending, no reforms
- Phase 2: Bond yields rise, RBI credibility concerns
- Phase 3: Foreign investor confidence hit
- Nifty impact: -5-10% over 6 months

## Impact Cascade Template

```
1° Impact (Immediate, 0-1 month):
  - Sectors: [List with +/- magnitude]
  - Stocks: [3-5 most affected]
  - Mechanism: [Direct causal link]

2° Impact (Short-term, 1-6 months):
  - Sectors: [List with +/- magnitude]
  - Stocks: [3-5 affected through indirect channels]
  - Mechanism: [How 1° effects cascade]

3° Impact (Medium-term, 6-18 months):
  - Sectors: [List with +/- magnitude]
  - Stocks: [3-5 beneficiaries/losers of structural shift]
  - Mechanism: [How 2° effects create new dynamics]
```

## Key Economic Indicators for India

Track these to calibrate scenario probabilities:

| Indicator | Source | Frequency | Impact On |
|-----------|--------|-----------|-----------|
| CPI Inflation | MOSPI | Monthly | RBI policy, rate-sensitive sectors |
| GDP Growth | MOSPI/RBI | Quarterly | Broad market, earnings |
| IIP (Industrial Production) | MOSPI | Monthly | Manufacturing, capital goods |
| Trade Balance | DGFT | Monthly | INR, IT, pharma |
| FII/DII Flows | NSDL/NSE | Daily | Market direction, sector rotation |
| PMI Manufacturing | S&P Global | Monthly | Cyclicals, metals |
| GST Collections | Finance Ministry | Monthly | Consumer, government spending |
| Credit Growth | RBI | Monthly | Banks, economy |
| Auto Sales | SIAM | Monthly | Auto sector, consumer sentiment |
| Cement Production | CMA | Monthly | Infrastructure, realty |

# Sector Sensitivity Matrix — Indian Markets

Maps event types to their impact on NSE sectoral indices. Impact rated as: **High** (H), **Medium** (M), **Low** (L), **Positive** (+) or **Negative** (-).

## Event × Sector Impact Matrix

| Event | Banks | IT | Pharma | Auto | FMCG | Metal | Realty | Energy | Infra | Telecom |
|-------|-------|-----|--------|------|------|-------|--------|--------|-------|---------|
| RBI Rate Cut | H+ | L | L | H+ | M+ | L | H+ | L | M+ | L |
| RBI Rate Hike | H- | L | L | M- | L | L | H- | L | M- | L |
| INR Depreciation | M- | H+ | H+ | M- | L | M- | L | M- | L | L |
| INR Appreciation | M+ | H- | H- | M+ | L | M+ | L | M+ | L | L |
| Crude Up | L | L | L | M- | L | L | L | H+/- | L | L |
| Crude Down | L | L | L | M+ | L | L | L | H-/+ | L | L |
| US Recession | M- | H- | M+ | M- | M+ | H- | M- | M- | M- | L |
| Global Growth | M+ | H+ | L | M+ | L | H+ | M+ | M+ | M+ | L |
| Budget Capex | L | L | L | L | L | M+ | M+ | L | H+ | L |
| Income Tax Cut | M+ | L | L | M+ | H+ | L | M+ | L | L | L |
| Monsoon (Good) | M+ | L | L | M+ | H+ | L | L | L | L | L |
| Monsoon (Poor) | M- | L | L | L | M- | L | L | L | L | L |
| FII Outflows | H- | M- | M- | M- | L | M- | M- | M- | M- | L |
| FII Inflows | H+ | M+ | L | M+ | L | M+ | M+ | M+ | M+ | L |
| China Slowdown | L | L | L | L | L | H- | L | M- | L | L |
| Food Inflation | M- | L | L | L | M- | L | L | L | L | L |
| Defense Spending | L | L | L | L | L | L | L | L | M+ | L |

## Sector Profiles

### Nifty Bank (Weight: ~33% of Nifty 50)
- **Primary drivers**: Interest rates, credit growth, asset quality (NPA)
- **Most sensitive to**: RBI policy, global liquidity, FII flows
- **Sub-sectors**: Private banks (HDFC, ICICI, Kotak), PSU banks (SBI, BOB, PNB), NBFCs (Bajaj Finance)

### Nifty IT (Weight: ~14%)
- **Primary drivers**: USD/INR, US tech spending, deal wins
- **Most sensitive to**: INR movement, US economic outlook, visa policies
- **Inverse correlation**: Often moves opposite to banking/rate-sensitive sectors

### Nifty Pharma (Weight: ~4%)
- **Primary drivers**: US FDA approvals, ANDA pipeline, domestic formulations
- **Most sensitive to**: USD/INR (exports), FDA regulatory actions
- **Defensive**: Outperforms during risk-off, underperforms in strong bull markets

### Nifty Auto (Weight: ~6%)
- **Primary drivers**: Interest rates, fuel prices, monsoon (rural demand), EV transition
- **Most sensitive to**: Consumer sentiment, commodity prices (steel input cost)
- **Sub-segments**: Passenger vehicles (Maruti, M&M), Two-wheelers (Hero, Bajaj), Commercial vehicles (Tata Motors, Ashok Leyland)

### Nifty FMCG (Weight: ~8%)
- **Primary drivers**: Rural demand, monsoon, raw material costs
- **Most sensitive to**: Consumer inflation, monsoon, income tax changes
- **Defensive**: Low beta, steady in corrections, underperforms in strong rallies

### Nifty Metal (Weight: ~3%)
- **Primary drivers**: Global commodity prices, China demand, US infrastructure
- **Most sensitive to**: China PMI, global trade tensions, USD strength
- **Cyclical**: High beta, large swings with commodity cycles

### Nifty Realty (Weight: ~2%)
- **Primary drivers**: Interest rates, regulatory (RERA), demand cycles
- **Most sensitive to**: RBI rate decisions, housing demand, liquidity
- **High beta**: Amplifies both up and down moves

### Nifty Energy (Weight: ~12%)
- **Primary drivers**: Crude oil prices, government subsidy policy, gas pricing
- **Complex**: Oil producers (ONGC, Oil India) benefit from high crude; OMCs (BPCL, HPCL) suffer
- **Key distinction**: Upstream (positive crude correlation) vs downstream (negative)

### Nifty Infrastructure (Weight: ~5%)
- **Primary drivers**: Government capex, budget allocation, order inflows
- **Most sensitive to**: Budget announcements, government spending pace
- **Key stocks**: L&T, Adani Ports, Ultratech Cement

## Using This Matrix

1. **Identify the event type** from the headline
2. **Look up the row** in the matrix for direct impact sectors
3. **Follow the cascade**: 1° impact → 2° impact → 3° impact
4. **Verify with historical patterns** from headline_event_patterns.md
5. **Consider timing**: Some impacts are immediate, others take months

### Example: "RBI Cuts Rate by 25 bps"

1° (Immediate): Banks (H+), Realty (H+), Auto (H+)
2° (1-3 months): NBFC (M+), Housing Finance (M+), Consumer Durables (M+)
3° (3-6 months): Cement (L+), Infrastructure (M+), FMCG rural (L+)