Domestic markets, caught in a global quagmire, are expected to open in deep red on Monday. As the US stocks crashed following unexpected inflation numbers (8.6 per cent) on Friday, global stocks are reeling under pressure. Nifty is expected to open well below 16,000, indicates SGX Nifty.
350 points gap-down opening for Nifty
According to analysts, market awaits some positive cues to arrest the bearish trend. However, there are no such visible signs, they added. It is now clear the US Fed will hike interests more aggressively and remain hawkish, experts said. Though most of the negatives are expected and priced-in by market players, lack of buying has affected the markets, they lamented.
SGX Nifty at 15,867 indicates, a gap down opening of about 350 points, as Nifty futures on Friday closed at 16,219.35. Asian markets, too, in sea of red with most tumbling between one per cent and three per cent.
Strong IIP numbers
However, market experts said the India economy is better placed.
The Index of Industrial production (IIP) moved to an 8-month high of 7.1 per cent y-o-y in April 2022 from an upwardly revised print of 2.2 per cent in March 2022 (earlier 1.9 per cent).
On sequential basis, the index contracted 9.2 per cent (MoM) in April 2022 from an expansion of 12.9 per cent in March 2022 in line with seasonal phenomenon.
“Overall, the spurt in prices of key commodities and importantly the fresh supply chain bottlenecks triggered by the continuing Russia-Ukraine conflict are likely to slow down the revival in the industrial output in the near-term,” Acuité said while retaining GDP growth for FY23 at 7.5 per cent with moderate downside risk.
According to market experts, Indian market, which is so far on better footing, will lead in recovery phase on the back of strong economic activity.
Aggressive FPI selling
The key concern is continuous selling by foreign portfolio investors. According to provisional figures, FIIs were net sellers of ₹12,662 crore in the equity markets during the week and domestic institutional investors (DIIs) were net buyers of ₹9,611 crore.
The Indian 10-year G-Sec yield rose 6 bps to 7.52 per cent. The rupee depreciated by 24 paise to close at 77.84 agains the US dollar. The yield on the 10-year US Treasury note jumped 11.5 basis points to 3.156 per cent, the highest since November 9, 2018.
“Till date, the monthly FPI net flows is negative in anticipation of a hawkish FOMC meeting. This selling can reverse if current and future policy measures announced are in-line with the market view and vice versa,” said Vinod Nair, Head of Research at Geojit Financial Services.
“The domestic market will continue to be dominated by global trend and FPI selling may continue in the near-term; however, we expect a moderation in FIIs selling during the short to medium-term. This is because a large part of the changeover like economic slowdown, hawkish monetary policy, supply constraints and high inflation is factored in the market prices, which was consolidating over the last seven-months,” he said.
“For the central banks to maintain the aggressive policy in the long-term the inflation must remain high. While the future inflation will depend on the developments of war and Chinese supply, which may relax in the short to medium-term,” he added.