Global equity markets including stock market of India has been under selloff heat after the US inflation year-on year surged highest in last four decades. The BSE Sensex fell 492 points to 58,153 and the Nifty50 declined 142 points to 17,375, weighed down by FMCG, IT, infra, select banking & financials and energy stocks. However, metals stocks bucked the trend with the respective index rising more than 3 per cent.
Ajit Mishra, vice president research, Religare Broking, said: “Markets traded volatile and lost nearly a percent, in continuation to the prevailing consolidation phase. After the weak start, the dovish stance from the RBI boosted sentiment in the middle however the news of US inflation hitting 4 decades high again soured the mood. Meanwhile, volatility remained across the board and most sectors ended lower in line with the benchmark.”
Here are Key Factors that Traders Need to Keep a Close Eye on:
Q3 Earnings this Week
“We’re now in the last leg of the earnings season and companies like Adani Enterprises, Coal India, Eicher Motors, Ambuja Cements and Nestle India will announce numbers during the week along with several others,” Mishra said.
Inflation
The Reserve Bank of India seems less worried about CPI inflation as the central bank expects inflation, though looks elevated, to moderate in the first half of FY23. Hence, last week, it retained an accommodative stance with no change in key policy rates.
The inflation has been rangebound and is expected to hit the upper boundary of RBI’s’ targeted level (4 percent and plus-minus 2 percent) in January 2021 but could moderate in subsequent months, hence the central bank may continue with an accommodative stance and will focus more on growth, experts feel.
Oil Prices
Oil is the key part of our import bill and the rising oil prices to more than seven-year high amid escalation of tensions between Ukraine and Russia is a rising risk as India has to shell out more money for importing oil than earlier. On the other hand, the government is not increasing fuel prices, especially due to ongoing States elections (Uttar Pradesh, Punjab, Goa, Manipur and Uttarakhand), but experts feel the fuel prices could increase after those elections get over.
International benchmark Brent crude futures jumped up to $95 a barrel intraday on Friday, before ending up at $94.44 a barrel against $93.27 a barrel on a week-on-week basis. The prices surged 32 percent in the last two months amid supply concerns.
FII Selling & US Bond Yields
The behaviour of FIIs who have been relentless sellers for the past several months will be closely watched. FII outflow amid rising US bond yields indicating faster policy rate tightening in the US to fight inflation in 2022 has been restraining equity markets from rising significantly towards record highs for more than three-and-half-months now, though domestic investors including retail have been providing strong support at lower levels amid economic recovery.
FIIs have net sold more than Rs 5,600 crore worth of shares in the passing week, taking monthly outflow to over Rs 9,700 crore in February. Their total selling was more than Rs 1.52 lakh crore since October 2021.
On the contrary, domestic institutional investors have net bought Rs 3,562 crore worth of shares during the week gone by, taking total monthly buying to more than Rs 5,800 crore in February. They have been net buyers since March 2021.
The US bond yields cooled down after crossing the psychological 2 per cent mark during the passing week amid inflation concerns. It settled flat at 1.92 per cent on a week-on-week basis.
State Elections
Another key event to watch out for would be the developments related to five States elections including Uttar Pradesh, Punjab, Uttarakhand, Goa and Manipur. Assembly polls in Uttar Pradesh have already kicked off last week, while Uttarakhand, Goa and Punjab polls will take place next week. Manipur polls will be in the last week of February.
Geopolitical tension may take centerstage after inflation
Santosh Meena, Head of Research, Swastika Investmart Ltd., said: “The rollercoaster ride is continued in the Indian stock market where global headwinds are causing pressure at higher levels amid supportive domestic cues. World markets are trying to adjust with expectations of a sharp rise in interest rates in the US after record inflation but the elevating geopolitical tension is trying to make things worsen. US markets witnessed sharp selling pressure in late trade of Friday’s trading session after some news on the Russia-Ukraine standoff. This tension also led to a sharp rise in crude oil prices which is not good for emerging markets like India.”
LIC IPO Expected Shortly
LIC IPO is a key talking point among market participants as it is going to be the biggest IPO in Indian market history. “It is expected to hit the market soon that may bring at least 1 crore new Demat accounts and that could be a big positive for the dynamics of the Indian market because if 10 per cent of these investors become active then it will increase participation of retail investors and it will also help the government to generate revenue through STT. Apart from positive aspects, there could be some negative impact on the secondary market as it may suck out the liquidity from the secondary market,” said Meena.
Nifty Technical Outlook
Technically, Nifty is facing resistance at 100-DMA which is currently placed at 17,650 level. On the downside, 17,300 is immediate support below this, 17,000-16,800 is a critical demand zone and the buy-on dip texture will remain intact till Nifty trades above 16,800 that is 200-DMA.
Bank Nifty has a comparatively strong chart structure however it is facing resistance in the 39,000-39,500 zone; above this, we can expect a fresh rally towards 40,200/41,000 levels. On the downside, 20-DMA of 38,200 and 100-DMA of 37, 800 are immediate support levels while 37000-36500 is a critical demand zone.
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