The new week is likely to see a flat opening for domestic markets, SGX Nifty indicates. Analysts expect the stock to remain cautious despite backing of foreign portfolio investors.

Siddhartha Khemka, Head - Retail Research, Motilal Oswal Financial Services Ltd, said, currently, markets are trading range bound and valuations are fair with Nifty trading at ~18x FY24E EPS. Thus, there is room for modest upside but only if corporate earnings do not see material downgrades ahead.”

Also read: Stocks that will see action on February 20, 2023

F&O settlement

Market experts believe a keen tussle is on the cards between bulls and bears with most of the influential factors being factored in. In the near term, global cues will dictate market direction. With the settlement of February derivative contracts on Thursday, analysts expect volatility to continue, at individual stock level.

Also read: Global trends to guide equities this week amid lack of major trigger in domestic markets

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“As we parse the never-ending inflation saga in the US, one thing that is becoming clearer is that inflation remains a formidable foe and the Fed’s endgame isn’t clear yet. The markets still lack high-conviction answers to three interrelated macro questions: How quickly does core inflation decline; how much unemployment is required to reduce wage inflation; and what terminal rate delivers a soft labor market, said Madhavi Arora, Lead – Economist, Emkay Global Financial Services Ltd.

Asian stocks up

SGX Nifty 17,970 signals a flat-to-positive opening for Nifty, as Nifty futures closed at 17,954 but much lower than March futures close of 18,058. Most Asian stocks are up in early deal on Monday.

“Higher US inflation data and lower jobless claim data led to hawkish commentaries by some of the US Fed officials, which dented sentiments and led to the renewed fear of aggressive rate hikes in the subsequent meets to combat sticky inflation, said Khemka.

Also read: Germany, France soften stance on Indian Clearing Corporations

“On the domestic front, even the corporate earnings growth for 3Q FY23 moderated led by a weak demand environment and inflation-led margin pressure. Slowdown in consumption if persist, can pose a big concern,” he cautioned.

India’s underperformance

According to Dr VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services, the distinctive feature of stock market performance this year, so far, is India’s underperformance with Nifty down by 1.4 per cent YTD. In contrast, the Taiwan index is up by 8.3 per cent and the Shanghai Composite is up by 3.4 per cent. The principal reason for this variation in performance is the FPI outflows from India and inflows into other emerging markets like China, Taiwan, Hong Hong, and South Korea.

It appears that the sustained selling in India witnessed from early January is over but they might sell again at higher levels. FPIs have been buyers in autos and auto components and construction. They were sellers in banking and financial services in which they are sitting on good profits, he said.

Also read: FPIs shift focus back on Indian market; invest ₹7,600 cr in a week

Outflows from India have been triggered mainly by the high valuations in India and inflows into other markets have been triggered by their relatively cheaper valuations. The opening up of the Chinese economy and improving prospects there have played an important role in the massive flows to China.

An important recent trend is that FPI selling has reduced significantly and FPIs have even turned buyers in some recent days, said Vijayakumar.

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