The penultimate week of 2022 is likely to end on a weak note for domestic bourses with global stocks suffering under selling pressure. There is no sign of any support for the US markets, despite the most index heavyweight stocks fell sharply from their peak, amid fear of further tightening by the US Federal Reserve. The rising covid cases add further pressure to already belegaured market, said analysts.
However, what is comfiring the domestic markets is big buying by institutional investors - both domestic and foreign portfolio investors. Analysts expect buying to emerge at lower levels. Besides, with F&O monthly contracts set to expire in coming Thursday, analysts expect volatility to continue amid intense rollover by investors.
SGX NIfty at 18,100 indicates a sharp fall for Nifty, as Nifty January futures on Thursday closed at 18,273.85. It appears, the Nifty may tumble once again below 18,000-mark today.
The US stocks slumped, led by Nasdaq which slipped over 2 per cent at 10,476. The Dow Jones Industrial Average and S&P 500 plunged over one per cent each. Asia-Pacific stocks are down between 0.5 per cent and 1.6 per cent, with Korea’s Kospi (down 1.54 per cent) and Taiwan (1.23 per cent), leading the slide.
Edward Moya, Senior Market Analyst, The Americas OANDA, said: “The Grinch selloff is firmly in place after Micron delivered a gloomy outlook and as better-than-expected US economic data supported the Fed’s case for more ongoing rate increases.”
Global coordinated central bank tightening has yet to fully impact most of the economic readings for the major economies and that should have made investors nervous over earnings downgrades and credit risks, he furrher cautioned.
However, analysts advise investors of Indian stocks to buy on dips, thanks to better fundamentals. Both FPIs and domestic institutional investors were buyers worth ₹930 crore and ₹2,200 crore, respectively.
Amidst global gloom, India turned out to be an outlier when most of the global markets clocked negative returns. The relatively stable equity market in India was as a result of smart economic recovery from the pandemic shock and the growing dominance of retail investors, said George Thomas, Fund Manager- Equity, Quantum AMC.
India always at premium
“Historically, India has always traded at a premium to global markets due to the demographic dividend and reasonably stable policy environment. As the Indian market valuation is hovering close to its long-term average, the stock price returns henceforth will be largely driven by earnings growth. After many years of subdued earnings growth, the current earnings cycle in India looks promising in the medium term,” he said in his 2023 outlook note.
According to S Ranganathan, Head of Research at LKP securities, markets continued their downward journey even today despite a steady opening and absence of data on any new strain other than the sub-variants of Omicron elsewhere.
“With the force of gravity reversing on the back of rising interest rates and with PE expansion hard to come along, the street seems to prefer staying a bit light ahead of the new calendar year and earnings season,” he added.