Indian equities’ eight-day winning streak is likely to be halted on Wednesday, in line with global stock markets that are grappling with banking sector woes in the US.

All three major US indices slumped sharply overnight amid fears around contagion in the regional banking sector returned ahead of the Federal Reserve’s rate decision.

While majority of Asian markets are closed, markets in Korea, Taiwan and Australia are down by about 0.5-1 per cent.

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“Wall Street is quickly hitting the sell as it appears that the banking turmoil is not going away anytime soon and is ready to focus on the next weakest link—potentially distressed lenders with tremendous exposure to commercial real estate,” said Edward Moya, Senior Market Analyst, The Americas OANDA. 

“Risk appetite did not stand a chance as traders focused on lingering doubts over the regional banks, rising recession odds, and growing risks that the US could default on its debt next month,” the analyst added.

SGX Nifty at 18,150 indicates a gap down opening of about 65 points for NSE Nifty, as Nifty futures on Tuesday closed at 18,213.

Consolidation phase

Ruchit Jain, Lead Research ,5paisa.com, said, “Nifty consolidated within a range in Tuesday’ session, but the broader markets continued to witness buying interest and thus the Midcap and the SmallCap indices showed outperformance. Now, the overall trend continues to be up but the momentum readings on the hourly chart for Nifty have reached its overbought zone.” 

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“Many times, the indices continue to rally in the overbought zone as well when the trend is strong, but such setups do not provide a favorable risk reward ratio,” he cautioned. 

“Hence, we advise readers to avoid aggressive longs here and rather wait for a corrective dip and enter on declines near support,” he added.

Analysts expect only limited down side, as foreign portfolio investors have resorted to heavy buying in domestic markets. On Tuesday, they bought shares worth nearly ₹2,000 crore.

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