Indecisiveness to continue at Dalal Street

K. S. Badri Narayanan | | Updated on: Jun 15, 2022

All eyes on FOMC meet outcome

Indian stock markets are to oscillate between gains and losses on Thursday ahead of crucial US Fed meet outcome. Analysts expect the indecisiveness to continue with negative bias, as the whole investment fraternity closely monitors the Fed pronouncements.

Market experts say the market has already priced in a 75-basis point price hike by Fed. If the Fed surprises the market positively, one can see a violent pullback, they added. On the contrary, any shocking announcements will aggravate pain for global investors.

Given the inflation data at a 40-year high in the US, expectations of a 75 bps hike have increased, said Ajit Mishra, VP- Research, Religare Broking Ltd. "We thus reiterate our cautious view on markets and suggest limiting leveraged position ahead of the event," he said.

Deeper misery?

As the US stock market (S&P 500) officially enters a bear market, the June BofA Fund Manager Survey signals deeper misery for investors. BofA Bull & Bear Indicator is down to 0.2. Wall Street sentiment is dire but no big low in stocks is expected before a big high in yields and inflation, and the latter requires uber-hawkish Fed hikes in June and July, the survey said.

SGX Nifty at 15,730 signals a flat opening for domestic markets. Global stocks are mixed. Equities across China, Hong Kong and Taiwan are up in early deal even as Japan, Australia and Korean markets are down marginally. Overnight, while the tech-focussed Nasdaq closed flat but in green, Dow Jones Industrial Average and S&P 500 closed in red.

WPI inflation

Thanks to rising crude oil prices and supply chain disruption, India's inflation based on the Wholesale Price Index (WPI) hit a fresh high in May, rising to 15.88 per cent. WPI inflation was 15.08 per cent in April 2022 and 13.11 per cent in May 2021.

Vinod Nair, Head Of Research at Geojit Financial Services, said, "Domestic market restrained from heavy sell-off as CPI data moderated on an MoM basis and this had a calm down effect amidst global volatility. However, elevated WPI data continued to dominate the broad market, which is cautious awaiting tomorrow’s outcome of Fed policy. Earlier the global market was anticipating a 50 bps hike but now is worried about a higher rate hike due to persistent US inflation."

Shrikant Chouhan, Head of Equity Research (Retail), Kotak Securities, said, currently, the market is lacking conviction to bounce back although select bouts of recovery are not ruled out.

"Technically, after a sharp decline, the Nifty is consolidating in the range of 15,700-15,850. The short-term formation is still on the weak side. And we are of the view that if the index slips below the level of 15,700, it could hit 15,600-15,550 levels. On the flip side, 15,850 would act as an immediate hurdle for the bulls. Above which it could move up to 15,950-16,000,” he added.

Published on June 15, 2022
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