Market expected to begin the first session of 2022 on a flat note

Indian markets are expected to open flat, beginning the first session of the new year 2022 on a quiet note.

The domestic market is expected to remain range bound amid a lack of global cues. SGX Nifty at around 17,410 levels indicates a flat opening for Nifty as Nifty January Futures closed at 17,420 on Friday. Asian markets were trading higher in early trade.

The market is expected to be influenced by domestic cues at the beginning of the week, as rising Covid-19 cases, including the Omicron variant, continue to weigh on investor sentiments amid a lack of global cues and low volumes.

Domestic cues are likely to dominate at the beginning of this week, with the market expected to react to monthly auto sales figures and Goods and Services Tax (GST) collection figures for December apart from PMI data.

"Domestic bourses may be influenced by an eventful economic calendar in the first week of 2022, starting with auto sales figures," said Yesha Shah, Head of Equity Research, Samco Securities.

Santosh Meena, Head of Research, Swastika Investmart said, "Domestic cues may dominate at the beginning of New Year. The market will have a lack of global cues next week and volumes will be on the lower side where domestic cues may dominate."

"On the domestic front, monthly auto sales numbers will be an important trigger that may lead to stock-specific movement whereas the market will have an eye on Covid cases and fresh restrictions," added Meena.

GST Collections

The GST collection in December topped ₹1.29-lakh crore, the lowest in three months.

However, the average monthly gross GST collection for the third quarter of 2021-22 was ₹1.30-lakh crore against ₹1.10-lakh crore and ₹1.15-lakh crore in the first tow quarters, respectively, as per a Finance Ministry statement.

Auto sales numbers were mixed where leading passenger vehicle makers such as Maruti Suzuki India (MSIL) and Hyundai Motor India (HMIL) continued to be impacted by the semiconductor shortage and reported a decline in December sales year-on-year. Honda Cars India also reported a dip in sales. However, M&M and Tata Motors' sales were up. In the two-wheeler segment, market leader Hero MotoCorp’s sales declined. Royal Enfield also reported a decline in sales year-on-year (y-o-y) during the month.

According to Shah, "Despite the near-term headwinds, the long-term outlook is largely positive, with most automakers anticipating a gradually improving chip shortage situation."

"Besides that, the domestic manufacturing PMI number will be an important metric to monitor. When the FOMC minutes are released later this week, Indian markets may move in tandem with global markets as investors try to read between the lines of the Fed's action plan. In the midst of volatility, investors should focus on the long-term picture rather than the short-term headwinds and position their portfolio accordingly," added Shah.

FII selling

One of the most important factors weighing on market sentiments has been consistent selling by FIIs.

"If we look at the data then FIIs are still net sellers however selling has come down whereas DIIs are continuously supporting the market. It will be interesting to see how institutional investors will approach the market in the new year," said Meena.

DIIs continued to remain key buyers during the last session of 2021. FIIs purchased equities worth ₹575.39 crore while DII purchased equities worth ₹1,165.62 crore on December 31, 2021, according to exchange data.

"If we look at the derivative data then FIIs' long exposure in the index future stands at 68 per cent whereas the put-call ratio is sitting at 1.41 level that indicates a positive bias. If we look at the OI built up then put writers are looking confident in 17,200-17,300 area while there is no major built up in call option side till 18,000," said Meena.

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