In A Volatile Market, What Should Investors Look For This Week

Sensex and Nifty 50 dropped by nearly 4% last week (May 9 to May 13). Although, the last two trading sessions were mildly red and almost tilting towards a flatter stick, however, the tone stayed bearish.

On Friday, Sensex closed at 52,793.62 lower by 136.69 points or 0.26%. Heavyweights SBI, ICICI Bank, Axis Bank, Bharti Airtel, Maruti Suzuki, HDFC Bank, Bajaj twins, and Tata Steel dragged the benchmark and offset gains from Sun Pharma, HUL, Reliance Industries, Titan, ITC, Dr. Reddy’s, M&M, and Nestle.

Nifty 50 settled at 15,782.15 lower by 25.85 points or 0.16%.

Smallcaps outperformed on both exchanges during the last day, while some notable gains were also witnessed in midcaps. In terms of sectoral indices, auto, consumer durables, and pharma stocks were top performers, while banking and metal stocks were top bears.

Vinod Nair, Head of Research at Geojit Financial Services said, “Lingering concerns over the weakening rupee, global interest rate hikes, elevated inflation numbers, and lockdowns in China kept the markets on the edge this week.”

Yesha Shah, Head of Equity Research, Samco Securities said, “Nifty 50 ended the week sharply negative and is now trading around a strong support level of 15,700 which coincides with the bottom end of the downward sloping channel. BankNifty is also trading near the rising trend line support formed from the lows of March 2020.”

“Both the Indian and major global indices are now at oversold levels. So, an immediate rebound in the Nifty and BankNifty is highly possible,” Shah added.

In the last five trading sessions, investors’ wealth on BSE has been wiped out to the tune of 13,83,637.96 crore. On Friday, BSE market cap stood at 2,41,34,078.84. On May 6th, the market cap was around 2,55,17,716.8 crore.

FPIs continued to be net sellers last week. Now, in the first weeks of the trading session in May, FPIs outflow stands at 25,216 crore in the equity market, as per NSDL data. The offloading of Indian equity shares so far in May has already surpassed the outflow of 17,144 crore in the whole month of April. So far in 2022, outflow in the equity market is at 1,52,378 crore.

India’s retail inflation reached an eight-year high of 7.79% in April due to soaring food prices. The inflation has stayed above the RBI’s upper target of 6% for the fourth consecutive month.

Four IPOs nearly worth 26,500 crore entered the markets for public subscriptions last week. The 20,557 crore LIC IPO which is the largest so far in the market, oversubscribed by 2.95 times, while the 538.61 crore Prudent Corporate Advisory Services IPO fully subscribed by 1.22 times. The 5,235 crore Delhivery IPO subscribed by 1.6 times and the 165.42 crore Venus Pipes & Tubes IPO subscribed 16.31 times on the last day.

In terms of the Indian rupee, the domestic currency settled 5 paise lower at its new lifetime low of 77.55 against the greenback on Friday.

Jateen Trivedi, Senior Research Analyst at LKP Securities said, “Rupee traded the day on a range-bound session near 77.45 as dollar index after strong rally traded flat. On a weekly basis, the rupee closed very weak, down about a percent compared to Last week as rate hike with rapid speed played negatively on overall sentiments.”

Going forward this week, WPI inflation figures, LIC listing, rupee movement against the dollar, upcoming IPOs, Q4 earnings along with the performance of global cues will sway sentiments in the market.

This week, three IPOs worth 2387 crore will be available for public subscriptions. These are – Paradeep Phosphates IPO, Ethos IPO, and eMudhra IPO.

Shah said, “As the result season approaches its climax, D-Street will move in sync with global news flow. Next week India’s WPI data will be released and the much-anticipated IPO, LIC, will be listed on the exchanges. Apart from These, no other major events are expected. In absence of any positive catalysts, indices are expected to remain under pressure as selling is emerging on every bounce.”

“The release of higher-than-expected US CPI data suggests that the inflationary pressure will persist in the near term. However, it is presumed to have peaked and will gradually decline in line with the ongoing fall in crude and other commodity prices, & a slowdown in the economy. The Fed surprised the market with a hawkish stance, limiting liquidity, which limits further setbacks in the future,” Nair added.

Further, Nair said, “We can expect stability in the market as FIIs selling reduces factoring inflation & Fed policy. On the other hand, DIIs have lost their confidence after bearing continuous losses.”

What should investors look for this week?

As per Nair, given the current volatility in the market, investors prefer defensive sectors like IT and Pharma supported by the weakening INR. Going ahead, the major determinant for market direction would be the pace of decline in inflation in response to the Fed measures.

Shah said, “Basis how Nifty opens next week, highly aggressive traders may initiate long trades with a strict stop loss right below 15,700. The immediate resistance is now set at 16,600 levels.”

“Investors are therefore urged to remain on the sidelines since it is preferable to wait out the storm than to go bottom fishing during such turbulent phases,” Shah added.

On rupee, Trivedi said, “The rupee will be seen taking weakness on any rise till the time market prices in the rate hike cycle”

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