Domestic stock markets are likely to open with negative bias on Monday, tracking weak global cues. SGX Nifty at 17,082 indicates a gap-down opening of nearly 100 points. According to analysts, global cues and corporate earnings will will dictate market direction. They further pointed out that consolidation phase will continue for domestic markets.
Asian stocks weak
Asian stocks are down in early deal on Monday led by Australia, Taiwan and Japan. On Friday, the US stocks closed lower amid heightened volatility.
Santosh Meena, Head of Research, Swastika Investmart Ltd, said: "Indian equity markets have been in a range for the last three weeks. The market will look for direction from Q2 earnings and global cues. Earnings season kicked off with IT earnings. This week, many financial and cement companies will come out with their Q2 results."
According to market observers, selling by foreign portfolio investors will continue and that would be absorbed by domestic investors to a greater extent.
Citing NSDL data, VK Vijayakumar, Cheif Investment Strategist at Geojit Financial Services, said the FPIs have net sold equity worth ₹7,457 crore till October 15, taking their net equity selling to ₹1,76,246 crore so far in 2022.
FPI behaviour
“An important trend in FPI selling is that whenever they sell continuously the selling is large in financials and IT which form the largest chunk of FPI holding. This trend is evident even now. FPIs have been selling in oil & gas and metals since these segments will be impacted by global economic slowdown,” he said.
“The major trigger for FPI selling is the sustained rise in the dollar and expectations that the dollar will continue to remain strong in the current global macro construct,” Vijayakumar added.
A reversal in FPI selling will happen when the dollar shows indications of peaking and reversing, he further said.
According to Meena, "If we look at the derivative data, the short positions of FIIs in the index future have come down to 77 per cent from the record level of 87 per cent, but it is still in oversold territory."
The Nifty put-call ratio is sitting at 0.91, which is also an oversold level. The volatility index, the India VIX, has again slipped below its 200-DMA, which is providing comfort to the bulls, he added.
Festive demand
Experts project that rally to continue in the short-term, led by festival demand, Q2 results, and the positive trends in the global market.
The sectors such as IT, pharma, FMCG, durables, green initiatives, specialty chemicals, and mass manufacturers are likely to outperform with value buying as the theme, said Vinod Nair, Head of Research at Geojit Financial Services.