Indian stock markets lost over 4% this week, ending two-week period of consolidation. A surprise rate hike from the RBI pushed the bulls on the back foot while increasing fear of aggressive rate hikes from the US Fed and mixed earnings also weighed on the sentiment. And analysts do see the possibility of a turnaround in sentiment soon.
The direction of global equity markets along with movement in the dollar index and crude oil prices will continue to dominate the domestic market sentiment, they say. The April inflation numbers of US, due on Wednesday, will be key to watch out for this week. And any positive surprise could trigger a short-covering rally given oversold conditions, they say.
In India, “FPIs continued selling in the early days of May also with a net sell figure of ₹6723.59 cr through 6th May. Since markets have turned very weak globally FPIs may continue to sell, perhaps with reduced volume. Even after the recent correction in the market, valuations are not cheap,” said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
“Perhaps, if Nifty corrects another 5% from the current levels, FPIs are likely to turn buyers. With aggressive Fed tightening, lockdowns in China and the Ukraine war lingering the situation is not favorable for a sharp turnaround in markets.”
Technically, says Santosh Meena, Head of Research, Swastika Investmart, the Nifty has fallen below the key support level of 16800 which led to sharp selling pressure in the market. “However 16200-16000 is an immediate demand zone where we can expect some pullback while below the 16000 level, 15700/15500 will be the next support levels. On the upside, 16650-16700 will act as an immediate supply zone while 16900-17000 will be the next resistance area,” he added.
However, Mr Meena said, if we look at the derivative data then long exposure in the index future of FIIs has dipped to a multi-month low of 22% which is extremely oversold whereas the put-call ratio of 0.74 is also indicating an oversold territory therefore we can expect a bounceback in the market near to 16200-16000 zone.”
Bank Nifty, on the other hand, has also slipped below the psychological level of 35000 where 34000 is an immediate and strong support level while 33500 will be the next support level, he said. “On the upside, 35350-35500 is an immediate resistance zone while 36000 will be the next hurdle.”
In the coming week, participants will first react to the Reliance numbers which were announced post-market on Friday, said
“Besides, developments on the Russia-Ukraine front and the performance of global markets will be on the radar. On the macroeconomic front, IIP and CPI Inflation data are scheduled for May 12 and the market will be closing eyeing these numbers, to gauge the next possible move from the RBI in the June meeting. Markets are reeling under tremendous pressure and indications are in the favour of further decline ahead,” said Ajit Mishra, VP Research. Religare Broking.
Vinod Nair, Head of Research at Geojit Financial Services, says that on the other hand, domestic numbers like GST collection, auto sales and PMI for the month of April give a sense of an improving economic outlook.
“In the coming week, the market will track inflation numbers across the globe. Although the numbers will remain high, the chances of a major market reaction are low given that the impact has already been factored in,” he said.