Domestic markets are likely to come under pressure on Wednesday as the US debt ceiling talks continue to drag.
SGX Nifty at 18,280 indicates a gap-down opening for domestic markets; Nifty May futures on Tuesday closed at 18,358 and June futures at 18,434.
Besides, technically the market is in an overbought position and needs a healthy correction, said analysts. Markets to remain volatile, due to global events and ahead of settlement of May month contracts, as traders indulge in rollovers, they added.
All the key benchmarks — Dow Jones Industrial Average, Nasdaq, and S&P500 declined sharply between 0.7 per cent and 1.3 per cent.
US stocks are declining as debt ceiling talks have hit a major roadblock and the latest round of economic data suggests the disinflation process is going to start to struggle.
“What is also weighing on sentiment is the China-US confrontation which could put added stress in the chip space,” said Edward Moya, Senior Market Analyst, The Americas OANDA.
Tracking US stocks, equities across the Asia-pacific region are down around 0.2-0.4 per cent.
Despite global gloom and the impending settlement of monthly F&O contracts on Thursday, analysts expect markets to remain volatile and stock-specific action will continue. The continuous faith posed by foreign portfolio investors is likely to keep the market relatively stable, they added.
“We expect sector rotation to continue, with mid-cap particularly gaining strength,” said Siddhartha Khemka, Head-Retail Research, Motilal Oswal Financial Services Ltd.
Ashwin Ramani, Derivatives & Technical Analyst, SAMCO Securities said, “Call writers were seen exiting from the 18,300, 18,200 & 18,100 strikes while put writers aggressively built positions at 18,400 & 18,500 strikes, indicating support getting stronger at lower levels.”