Boiling global crude oil prices, geopolitical tensions involving Russia, continued selling by foreign portfolio investors (FPIs) and fear of swift hike in key interest rates in the US due to spiralling inflation are all taking a toll on market sentiments in India. The Sensex and Nifty fell by around 1 per cent on Thursday making it the third consecutive day of decline as bears maintained their grip on the market.

The Sensex closed at 59,464 with a decline of 634 points on Wednesday. The Nifty fell by 181 points to close at 17,757. Indian markets were reflecting the sharp fall in US markets on Wednesday as Brent crude touched $88 per barrel from $85 on Tuesday. In the cash markets, FPIs sold stocks worth ₹4,679 crore taking their selling so far in January to ₹12,415 crore in the segment, as per exchange data.

Mitul Shah, Head Of Research at Reliance Securities, said, “Domestic equities closed lower following weak global indications due to the possibility of Fed raising interest rates in the near term. US equities ended sharply lower after a diverse set of corporate earnings, the market continued to worry about higher US Treasury yields and the Federal Reserve tightening monetary policy.”

All eyes on Fed meet

“Investors are looking to next week’s Fed policy meeting for more clarity on central bankers’ plans to rein in inflation. Data last week showed US consumer prices increased solidly in December,” said Shah.

Yet, experts are of the view that markets may not see a big crash from the current levels.

The Budget on February 1 and Uttar Pradesh State election results on March 10 could be major triggers for the next big up move for Sensex and Nifty.

“Market fall on fears of inflation, rising interest rates and the anticipated Russian invasion of Ukraine is just a knee jerk and sentimental reaction. It is a good time to stay invested in Indian equity markets and keep an eye on the corporate earnings. India has far more positives that will weigh in the medium to long run than being worried about the short triggers like the Russia invasion news. Corporate earnings and government tax collections are bright in India. I’m focussed on infra spending and likely tax exemptions that the government is going to give to boost consumption,” said B Gopkumar, Managing Director & Chief Executive Officer of Axis Securities.

Mega IPOs on cards

Gopkumar is of the view that ahead of 2024 national elections, the government may give substantial tax exemptions to India’s middle-class and markets would rally on this. One of India’s largest corporate houses, Adani, will be launching a ₹3,600-crore IPO of the group’s food products company Adani Wilmar this month itself. The IPO will test the markets ahead of ₹85,000-crore mega IPO of LIC, which is expected to bring in huge FPI investments.

For immediate triggers, the global stock markets will be glued to the US central bank meeting early next week. Expectations are that there is a slight chance of Fed action on interest rates. However, news reports now suggest that market traders have fully priced in the first of four 0.25 percentage point hikes through 2022. The futures index and US were rising indicating a positive opening for the US markets.

Parth Nyati, Founder, Tradingo said, “The equity market is showing weakness for the third day in a row on the back of FIIs’ selling, rising US bond yields, and concerns of inflation. However, this is just a correction that should be taken as a buying opportunity.”

The volatility index rose 0.21 per cent to 17.82.

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