SGX Nifty indicates gap down opening for domestic markets

Domestic markets are expected to see another bout of volatility on Thursday with negative bias. Amid global slowdown, SGX Nifty indicates a gap down opening of about 60 points. SGX Nifty is hovering around 16,435 against the spot close of 16,508.

Asian stocks are down in early deal on Thursday. While Australia stocks are down over one per cent, equities across Japan, Korea and China slipped between 0.3 and 0.9 per cent in early deal. Overnight the US stocks tumbled between 0.5 per cent and 0.75 per cent.

Inflationary pressures

Rising inflation is the major concern for world market, as that could force central bankers across the world to increase their rates.

In the domestic market, though economic activity is stabilising, the fear of inflation eating into India Inc profit is hurting the sentiment. Government data on Wednesday revealed GST collection in excess of ₹1.45 lakh crore; and S&P Global India Manufacturing Purchasing Managers' Index came in at 54.6 in May, as against 54.7 in April, signalling a sustained recovery across the sector.

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'Healthy' Q4 results

Motilal Oswal Financial Services, in its latest India strategy report, said, the adverse macroeconomic backdrop with heightened worries on rising interest rates, elevated crude oil prices and liquidity tightening has kept the market volatile and jittery. Meanwhile, the domestic earnings season continues to remain healthy and provides a silver lining, notwithstanding the challenges faced on multiple fronts.

"We expect the full impact of elevated input costs to be felt in H1-FY23 as Q4-FY22 had some benefits of lower RM inventory. After the correction, the Nifty trades at 19.2x FY23E, at its 10-year average P/E of 19.4x. We find more value in large-caps than mid-caps given the relative valuation equation."

However, the domestic brokerage said, "We reiterate that earnings delivery is crucial for markets to hold, in an adverse milieu of volatile and challenging macro."

Mitul Shah, Head of Research at Reliance Securities, said changes in oil prices and amendments to import and export duties might play a role in assessing the market’s trajectory. "However, the continued selling by FIIs and plunging rupee are likely to have economic implications in the near term. Globally, the Russia-Ukraine crisis and supply chain disruptions continue to impact global and Indian equities," he added.

Technically safe?

Analysts said technically domestic markets are in better footing. "The near term uptrend of Nifty remains intact and present consolidation or minor weakness could be considered as a buy on dips opportunity for the short term. The market could shift in to another one or two sessions of range move or minor weakness, before showing a sharp upside bounce from the lows. The near term upside target remains intact at 16,800 levels," said Nagaraj Shetti, Technical Research Analyst, HDFC Securities.