Domestic markets are expected to open weak on Wednesday, tracking global cues. Overnight the US stocks, especially, tech-focussed Nasdaq, tumbled the most as the US Federal Reserve reiterated its hawkish stance due to rising inflation. Besides, the prolonging Russia-Ukraine conflict keeps investors on edge.
SGX Nifty at 17,880 (7 am), indicates another 140-point gap down opening as Nifty futures on Tuesday closed at 18,017 on the NSE. Asia-Pacific stocks too opened on a weak note with Nikkei tumbling over one per cent while Korea, Australia and Taiwan slipped between 0.5 and 0.8 per cent.
Eyes on FPIs strategy
According to analysts, just at a time when foreign portfolio investors turned positive into Indian markets, the tough statement by the US Federal Reserve Governor Lael Brainard that she expects rapid reductions to the central bank's balance sheet will keep them on the edge. After months of selling, FPIs have been buying into Indian stock markets in the last six days.
According to analysts, besides the current headwinds, investors and traders will also focus on the three-day RBI monetary policy meet, which starts today. Though most experts believe a status-quo stance on interest rates, the comments of RBI will be closely watched, given the current crude oil prices.
Status-quo from RBI?
Prashant Pimple , Managing Director & Chief Investment Officer – Debt, JM Financial Asset Management Limited, said, "We believe that RBI in its current MPC may maintain status quo as far as rate actions are concerned".
However it may try to give some solution for generating demand for the higher than expected borrowing scheduled for FY‘23. RBI would most probably revise the GDP estimates lower on the current disruptions and raise inflation forecast at the upcoming Monetary Policy, he added.
According to him, market will closely monitor the upcoming policy for bond supportive measures such as OMO/Operation Twist or extension of Held-To-Maturity (HTM) dispensation further beyond March 2023. On the liquidity front, the RBI is expected to continue to absorb liquidity via VRRR auctions.
‘Downward pressure’
Deepak Jasani, Head of Retail Research, HDFC Securities, said Nifty formed a bearish counter attack line on April 5 but the advance decline ratio remained very positive suggesting that the broader market continues to do well. "The Nifty also did not breach the highs of the previous day. 18115-17791 could be the band for the Nifty in the near term, but the highs of the current upmove are yet to be registered," he added.
Shrikant Chouhan, Head of Equity Research (Retail), Kotak Securities Ltd, said, "We are of the view that as long as the index is trading below the level of 18050, the correction could continue up to 17850-17750. A fresh uptrend is possible only after the 18050 range breakout and could move up to 18130-18200."