Indices have been under pressure owing to the persistent Ukraine-Russian tensions looming as well as FII outflow. Now on the last day of the trading week, indices made their losing streak to the third consecutive day, weighed down by pharma and realty indices.
From key meetings over the Russia-Ukraine border crisis to surging energy prices that may disturb India’s fiscal math to ongoing state elections to futures and options expiry — uncertainties are too many to predict a definite course of the market, say experts. Some of these are persistent issues and have been affecting markets for some time now.
Vinod Nair, Head of Research at Geojit Financial Services, said: “Domestic equities were moving in tandem with developments in the Russia-Ukrain crisis and global inflationary pressure. Domestic indices started the week plunging deep in the red as increased tension between Russia and Ukraine sent oil prices rising and forced investors to dump risky assets. However, a ray of hope that the tension is de-escalating prompted a sharp recovery in domestic equities. India’s CPI inflation for January rose to 6.01 per cent breaching RBI’s tolerance level due to high food inflation and low base effect and the same will be a point of concern for the domestic market in the near term.
Market players will keep a careful eye on developments in the Russia-Ukraine situation. Meanwhile the headline indices will also keep an eye on other geopolitical uncertainties. Nair said: “In yet another blow to global inflationary pressure, UK’s inflation jumped to 5.5 per cent in January recording a 30 year high, putting pressure on the Bank of England for a further rate hike sooner than anticipated. Indices ended the week keeping volatility high as the US market witnessed sell-off following the release of the FOMC meeting minutes where the Fed officials outlined plans for an interest rate hike and said that the unwind of the bond portfolio could be aggressive.”
“FIIs can be expected to sell more unless market corrections make valuations attractive. DIIs and HNIs are slowly accumulating high-quality financials whose valuations have turned attractive due to sustained FII selling,” said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
There is one silver lining for the Indian market is that Crude Oil is not boiling amid this geopolitical tension because there is an expectation that the Iran nuclear deal may conclude soon which may lead to the supply of Iranian crude oil in the future.
Nifty Technical Outlook
Ajit Mishra of Religare Broking, said: “On the index front, a decisive close above 17,500 in Nifty would help the bulls to regain some strength else sideways to negative bias will continue, with crucial support around the 16,800-17,000 zone. Meanwhile, it’s prudent to limit leveraged positions and wait for clarity.”
Bank nifty is also trading volatile where 38,000-38,500 is acting as an immediate resistance zone; above this, 39,000-39,500 is the next important resistance area. On the downside, 50-DMA of 37,250 is an immediate support level then 200-DMA of 36,500 is a critical support level.
What Should Investors do?
Mishra recommends sticking to hedged positions and suggests preferring index majors over others. On the index front, Nifty needs a decisive close above 17,500 to regain strength while the 16,800-17,000 zone would remain the key support, he added.
“As current global cues are forcing global equities to remain unstable, the domestic market is also expected to continue its volatile trend in the coming days. In such a volatile market a prudent approach is to have a balanced portfolio with a mix of equity, debt, gold, and cash,” Nair suggests.