Domestic markets are likely to open on flat note despite global uncertainty. Gift Nifty at 19,500 indicates a marginal gain at open for Nifty. Analysts expect the market to remain in a narrow range ahead of result season and the outcome of RBI monetary policy review. Nifty futures on Wednesday closed at 19469.25.
The weakness in the US wherein the theme of higher inflation for longer is getting traction along with record yields is further driving risk off across emerging markets. Job openings in US also increased which further supported the narrative that economy is proving to be resilient, said Jaykrishna Gandhi, Head - Business Development, Institutional Equities, Emkay Global Financial Services. “We expect this earnings season to be of very high importance as commentary from management’s would be key especially with regard to demand and margin outlook as raw material prices increase driven by increase in crude price,” he added.
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Srikanth Subramanian, CEO, Kotak Cherry , said: “While the central bank is expected to hold on to the rates, the sticky inflation level remains a challenge given the fresh upsurge in global crude oil prices. It will be interesting to observe the RBI Governor’s tone during his address, especially after the US Fed chairman last month clearly outlined his intent to raise the rates further despite keeping policy rates unchanged. The RBI would also have to evaluate its strategy considering the fact that an increase of rates in the US and no change in India will lead to money flowing from India, creating issues both on forex reserves as well the currency front.”
Meanwhile, the aggressive selling by foreign portfolio investors is likely to keep market under pressure.
Persistent FIIs selling has pulled the Nifty down by 4 per cent from a recent high of 20222 levels. “We expect weakness to persist in the market in the coming weeks till the headwinds recede. The Q2 earnings season will start next week and is expected to maintain the growth momentum of previous quarters. Even the pre-quarterly updates released so far indicate healthy traction. Market direction going ahead will depend upon the combination of global/local macros and earnings delivery along with management outlook,” said Siddhartha Khemka, Head - Retail Research, Motilal Oswal Financial Services Ltd.
According to Gandhi, “While there is no reason to panic with regard to the structure of the Indian markets there is some caution warranted in the near term. The US 10 year treasury yields are closing 5% which will drive further outflows from the emerging markets.”