It appears Wednesday will see a keen tussle between the bulls and bears, as analysts await clear signals on the direction the market will take in the coming days. However, analysts expect stock-specific action to continue in the result season.

SGX Nifty at 17,520 indicates a marginal gain for domestic markets. While volatile US stocks closed with around 1 per cent gains, equities across the Asia-Pacific region are up marginally.

RBI's latest bulletin says the country's retail inflation was set to ease from the five-month high of 7.4 per cent, while economic activity is poised to expand.

Analysts expect the market to move in a narrow band, as both positives and negatives are already discounted by market participants.

The recent rebound in the markets can be largely attributed to the recovery in global indices, while earnings have been mixedr, said Ajit Mishra, VP - Research, Religare Broking Ltd.

However, analysts advise caution on equity asset class.

Global headwinds

Craig Erlam, Senior Market Analyst, UK & EMEA, OANDA, said the last couple of months have been tough for equity markets, since peaking at the end of the summer and a rebound of some kind would happen eventually.

"I'm just not convinced there's much substance behind it as the economic landscape looks treacherous, and we don't even know if we're at peak inflation and interest rate pricing yet. Those are substantial headwinds that will make any stock market rebound extremely challenging," he added.

Meanwhile, the BofA Global Research monthly Fund Manger's Survey (FMS) revealed investors' sentiment on the economic outlook in the next 12 months remains close to bearishness in October.

Shifting to cash

"But while the stock market was immune to the bleak sentiment till last month, it has started to better reflect investors' pessimism," the report said. .

FMS investors increased their average cash levels further to 6.3 per cent in October '22, up from 6.1 per cent last month and the highest since April '01 (still well above the long-term average of 4.8 per cent).

Despite FMS investors' sentiment towards equities close to max bearishness, equity funds have managed to capture inflows over the past three months, suggesting there is no sign yet of capitulation from retail/ institutional investors, the report further said.

"Apart from the global markets, we feel the participation of key sectors on a rotational basis would be critical for a sustained up-move. Amid all the positivity, traders should maintain their focus on overnight risk management," advised Ajit Mishra.

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