Bearishness in equity far from over, likely to continue next week
Jun 18, 2022
New Delhi [India], June 18 : After having closed this week on a negative note, Indian domestic equity benchmark indices are likely to trade with a downside bias next week as the aggressive monetary policy stance by the US Fed potentially triggered the fear of a recession.
The US central bank earlier this week raised the key policy rates by a steep 75 basis points, against expectations of 50 basis points hike to address the multi-decadal high inflation in the country. Typically, high inflation in advanced countries, especially in the US, has a negative bearing on other emerging markets, including India.
In India too, retail inflation has been over the Reserve Bank of India's upper tolerance band of 6 per cent for the fifth consecutive month in a row, while the Indian central bank projects that it would stay high till the third quarter of the current financial year, before moderating. Besides, domestic wholesale inflation has been in double-digit for over a year now.
During the current week, the benchmark index Sensex declined nearly 3 per cent, while it lost over 13 per cent since the start of 2022.
"The S&P 500 and our banking index have officially entered the bear market territory and the fear witnessed this week is expected to continue. The movement of the dollar index, crude oil prices, and the evolving Covid situation in China and India will be closely watched," said Yesha Shah, Head of Equity Research at Samco Securities.
As there are no other major domestic or international macroeconomic events in the coming week, the Indian indices are expected to be jittery, moving in tandem with the global peers, said Shah, adding that investors should therefore remain cautious and begin making small, selective investments in fundamentally superior companies that are available at reasonable valuations.
"We recommend that traders maintain a negative to neutral outlook in the coming week and use any bounce as an exit opportunity," Shah added.
Moreover, for fresh cues, the latest rise in the Covid caseload and the progress of monsoon in the country will also be monitored closely by the market participants.
"After the decisive breakdown of major support around 15,650, Nifty is now inching towards the 14,800-15,000 zone. In case of any rebound, the index would face stiff resistance around 15,550-15,700 levels. Investors, on the other hand, can selectively look for buying opportunities as several quality stocks are now available at a good bargain," said Ajit Mishra, VP - Research at Religare Broking.
Nifty closed the week at 15,294 points.
