Last week, rate hikes by major central banks and weak global cues weighed on investor sentiment. There was also flak on the strong dollar, which adds to the inflationary crisis. The Sensex registered a fall of 54,900, while the Nifty 50 breathed a little over 16,400. However, this week, the markets have been seen performing in a range bound manner with economic data like IIP, inflation and key earnings to trigger the performance. On Monday, markets will also react on the RIL numbers for Q4, while the focus will be on the mega LIC IPO that ends tomorrow.
BSE on Friday Sensex It closed at 54,835.58, down 866.65 points or 1.56%. The Nifty 50 closed at 16,411.25, down 271.40 points or 1.63%. A broad-based sell-off was recorded in the basket. Heavy profit-booking in heavyweights dragged the benchmark, while midcap and smallcap stocks also took the hit. Consumer durables, metals, banking, auto, capital goods and IT stocks were the biggest hit.
On Day 5, LIC IPO received bids for 29,08,27,860 equity shares against the proposed size of 16,20,78,067 equity shares – 1.79 times subscription.
In the last five-day trading session, both the Sensex and Nifty 50 have fallen by about 5 per cent.
Vinod Nair, Head of Research, Geojit Financial Services, points out that the rate hike by major central banks has dented investor confidence.
“Rate hikes by major central banks set the trend of global markets this week. Although the Fed’s less sharp hike of 50 bps initially pumped in optimism, higher rate hikes are needed to moderate higher inflation levels. Injured global markets with heavy selling. Bank of England, while raising its interest rates, warned about the potential risk of recession. Also, RBI hiked CRR by 50 bps in repo rate. The sudden announcement of 40 bps growth, though anticipated, shook investor confidence,” Nair said.
Meanwhile, Ajit Mishra, VP of Research at Religare Broking said, “Markets ended a 2-week long consolidation phase and the pressure on weak signals declined by over 4%. The tone was negative from the start and from RBI. A surprise rate hike pushed the market. Bulls on the back foot. Sentiment weakened further in the last session on rising fears of aggressive rate hikes from the US Fed. In between, mixed earnings announcements failed to provide any comfort. Eventually, both Nifty and Sensex settled at week closes, closing at 16,411 and 54,835 respectively. Across sectors, all indices ended with losses, with realty, auto and metals being top losers. Broader indices also edged up. Cuts were seen and fell in the range of 4%-7%.”
On the other hand, Nair also points out that domestic data like GST collection, auto sales and PMI for the month of April indicate an improvement in the economic outlook.
What to expect and what to focus on this week?
This week, Nair said, “the market will track inflation numbers around the world. Although the numbers will remain high, the likelihood of a major market reaction is slim because the impact has already been factored in.”
According to Mishra, this week, participants will be the first to react to Reliance’s figures, which were announced after the market on Friday. In addition, developments on the Russia-Ukraine front and the performance of global markets will be on the radar. On the macroeconomic front, the IIP and CPI inflation data are set for May 12 and the market is eyeing these numbers to assess the RBI’s next possible move in the June meeting.
On the earnings front, leading names like Asian Paints, LT, Cipla, Tata Motors, SBI and Siemens will announce their numbers among many others.
In this range-bound market, Nair advised to stick with sectors that are expected to be least affected by inflation and yield growth, such as banking, IT, pharma and green energy.
“Markets are under tremendous pressure and signals are in favor of further downside. The next major support for Nifty is at 16,000 levels and 16,650-16,800 zone will act as a barrier in case of any rebound. Along with most of the sectors The broader indices are trading in sync with the benchmarks, although select stocks are still strong. However, since global cues are largely determining the trend, we are focusing more on managing overnight risk and maintaining positions on both sides. Recommend to concentrate,” said Mishra.