Market report. Domestic markets to open with negative bias

Domestic markets are expected to open on a flat note on Monday. SGX Nifty at 18,710 indicates a flat-to-negative opening for domestic markets, as Nifty June and July futures on Friday closed at 18,709 and 18,797, respectively. The perceived coup at Russia will keep investors on tenterhooks, said analysts

Though the undertone remains bullish, analysts expect profit taking to keep market under pressure as both bulls and bears fighting for their supremacy. 

Hawkish comments

“Risk sentiment, last week, was marred by hawkish comments from Fed Chair Powell in his testimony before the Congress. He reiterated that lowering inflation to 2% had a long way to go and that Fed officials saw rates being somewhat higher by year-end. The market is currently pricing in a 72% chance of a 25bps hike in July. It, thereafter, expects the Fed to pause until January, before beginning to cut rates,” said IFA Global Research.

Also read: Markets may face volatility in holiday-shortened week ahead: Analysts

Bank of England, last week, surprised by delivering a 50bps hike, instead of 25bps, as inflation in the UK, especially core inflation continues to remain stubbornly high. Core CPI print for May came in at a 31-year high of 7.1 per cent against expected 6.8 per cent.

FPIs flows

Meanwhile, analysts expect foreign portfolio investments to moderate going forward.

V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said: FPIs continued their May strategy in June too, so far. Globally, Japan continues to attract the biggest inflows, followed by India. They were big sellers in China and also sold in S Korea and Thailand. 

“In India, FPIs were big buyers in financials, autos and capital goods. Since these segments are doing well and their prospects look good, they are likely to attract more inflows, going forward. FPIs continued selling in IT and metals since these sectors are facing many short term headwinds,” he added.

“FPI inflows are likely to moderate, going forward, due to rising valuations in India and the rising interest rate scenario,” he cautioned.

However, analysts say any correction will be a buying opportunity. 

“Weak commentary by global IT giant, Accenture, a rate hike by BOE, and hawkish commentary by US Fed Chair led to profit booking at higher levels that stopped Nifty from making a new high as the index fell short of just 1 point on Thursday. We expect the market to consolidate in the near term, although investors should use corrections as buying opportunity,” said Siddhartha Khemka, Head - Retail Research, Motilal Oswal Financial Services Ltd.

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