Thanks to a strong recovery in the US markets and a sharp drop in crude oil prices, domestic markets are likely to see a positive opening on Thursday. SGX Nifty at 17,750 indicates Nifty may see a gap-up opening of over 100 points.
Asia-pacific equities are mixed with Japan Nikkei’s surging nearly two per cent. However, Korean, Taiwan and Australian markets are up between 0.2 per cent and 0.7 per cent, while Chinese and Hong Kong stocks are down in early trade on Thursday.
Overnight, the US stocks recovered sharply led by Nasdaq that gained over two per cent; Dow Jones and S&P 500 edged up 1.40 per cent and 1.83 per cent, respectively.
QT (quantitative tightening) cycle continues and is well acknowledged by investors thereby acting as a limiter to equity valuation expansion, said ICICI Securities. However, the driver of QT cycle is the inflation trajectory, which has shown initial signs of a peak formation along with a dip in commodity prices.
Crude oil slumps
In a major relief to emerging markets such as India, crude oil fell sharply. While WTI crude oil fell to $82.56/barrel, Brent tumbled to $88.54. With India looks much better economically compared with other nations, analysts said foreign portfolio investors will continue to show interest.
“We maintain our March ‘23 target for the NIFTY50 at 19,000 given the positive outlook for profit, credit and investment cycles. However, we do not anticipate the earnings yield to breach the floor of around five per cent on the downside (upper limit of about 20x on P/E) in a QT environment,” I-Sec added.
On Wednesday, FPIs bought shares worth ₹758.97 crore.
Stuck in narrow range
According to Choice International, the Nifty continued to face stiff selling pressure around 17,800 levels where fresh call writing has been witnessed. The index ahead of the global economic events is stuck in a broad range between 17,450-17,800 levels, a break on either side will give trending moves, it added.
Open interest data indicates, on the call side, the highest OI witnessed at 17800 strike prices, while on the put side, the highest OI was at 17400 followed by 17500 strike price.
The market breadth has been positive. Nevertheless, the index has been restricted to move higher, said Ruchit Jain, Lead Research, 5paisa.com. This is primarily because of rising dollar index, short formations by FIIs in the index futures segment and weak global markets.
“The index is now trading within the range of 17800-17400 and a breakout beyond the same is required for a directional move. Hence, until we see a breakout on either side, traders are advised to be stock specific and avoid index directional trades,” he said.