New Delhi Interest rate hikes by the US Federal Reserve, the Swiss National Bank and the Bank of England amid turmoil in the banking sector kept equity markets under pressure last week, a trend analysts see continuing in the near term.
Analysts expect the stock market to remain volatile and volatile. Foreign portfolio investors (FPIs) remained net sellers during the week ended March 24 due to prevailing risk-off sentiment and global headwinds. Nifty fell 1% week-to-week and closed below 17,000 mark.
The much-anticipated Fed decision on interest rates has not provided a clear direction for the market. Meanwhile, the Indian government’s move to increase the Securities Transaction Tax (STT) on selling options at the end of the week further dented the market sentiments.
Nishit Master, Portfolio, said, “Market participants are balancing on very thin ice due to high anti-inflationary forces and rising interest rates, due to concerns about financial stability, and we expect the markets to move higher in the near term.” Will be unstable.” Manager at Axis Securities PMS He said that unless global central banks capitulate and give up their efforts to fight inflation through rate hikes, the market will continue to probe for weaknesses in the financial sector, which is likely to worsen in the near future. Will keep the market volatile. Duration.
The Fed raised interest rates by another 25 basis points (bps) to 4.75-5%, although it indicated it was on the verge of pausing further rate hikes. The Swiss National Bank also hiked its interest rate by 50 bps, while the Bank of England followed suit, raising rates by 25 bps.
The Fed’s move on rate hikes and commentary was anticipated by all, making this an eventful week. Sunil Damania, Chief Investment Officer, MarketsMojo said Fed raised rates but did not clarify its future course of action in terms of rate hike strategy and it appears Fed is unsure whether the Silicon Valley bank crisis will affect the US banking sector. How can affect Damania said the Fed would look at the flaws in the financial system and then decide its next course of action.
Meanwhile, the STT hike is also being considered as an untimely move, especially at a time when the markets are facing volatility. Saket Dalmiya, president, PHD Chamber of Commerce, said it would have some impact on market sentiment and trading volumes.
The week ahead is holiday-shortened and experts predict volatility to remain high due to the scheduled expiry of March month derivatives contracts. Besides, global cues, foreign inflows and volatility in crude oil could add to this decline, he said.
Analysts believe that uncertainty remains, and that concerns about a recession are adding to the downside pressure on markets. Furthermore, valuations of Indian markets have come down significantly after a sharp correction, but are still at a premium to emerging market peers and their long-term averages. It is keeping the growth under control amid global concerns despite better growth expectations for India.
Master said the Nifty 50 is currently trading at 18 times its FY24 estimated earnings, which is slightly higher than its long-term average, which could lead to a near-term underperformance by the markets. They expect FPI inflows to remain negative in the near term as any crisis globally, including bank runs in a particular region or a crisis with a shadow bank, or a significant emerging or developed market crisis, could send money back home. Will lead the money to send back. country for its perceived security.
“FPIs are selling and weak global cues are further dampening the mood. Besides, we may see cracks across sectors and a fresh fall in broad indices could further worsen the sentiment”, said Ajit Mishra, VP – Technical Research, Religare Broking Ltd.
Amidst all the pessimism, Mishra expects the Nifty to maintain the support zone of 16,600-16,800 levels, although the upside is also capped due to a tight resistance in the 17,200-17,400 zone. In such a situation, Mishra feels it is prudent to play it safe and wait for clarity.
While investor sentiments and market expectations are muted in the short term, experts also advise investors to capitalize on the chaos in the market by staggered investments during the year as valuations are coming down.
We feel the market is in the final stages of consolidation as the interest rate trajectory peaks in the next few months and inflation tends to fall in CY23 and the second half of CY24, said Vinod Nair, head of research at Geojit Financial Services. He believes that the uncertainty of the banking sector will not spread to other sectors or the economy, but the performance of the banking sector will remain subdued. A change in monetary policy from hawkish to neutral and a month-on-month decline in inflation would be the key triggers, he added.
