Indian stock markets are expected to see a weak opening on Wednesday. According to analysts, soaring crude oil prices could spoil the relief rally. Brent crude oil prices are hovering around $123/barrel and WTI at $115.20. This could pose a big risk for countries such as India, which just started recovering from Covid-led shock, fear analysts.
Prashanth Tapse, Vice President (Research), Mehta Equities, said, Nifty on Tuesday hit the pause button after the last three days of the relief rally. “Profit-booking started in the markets on fears that central banks across the globe can hike interest rates to curb inflation without impacting economic growth. Partly denting sentiments was the spike in oil prices, which are now at a three-month high on EU Ban,” he added.
Mixed global cues
SGX NIfty at 16,535 indicates a gap down opening of about 40 points, as Nifty futures on Tuesday closed at 16,577. Asia-Pacific stocks are mixed in early deal with Japan's Nikkei, Korea's Kospi, and Australia's ASX are up while Taiwan and Chinese markets are down marginally. Overnight, the volatile US stocks ended weak.
"The recent surge in crude oil prices has turned the participants cautious, said Ajit Mishra, VP - Research, Religare Broking Ltd. "Keeping all in mind, we suggest maintaining focus on sector/stock selection while keeping a check on leveraged positions," he added.
GDP number
India on Tuesday posted expected GDP and core sector output numbers, but to sustain, the momentum oil prices have to calm down, experts said.
FY22 GDP growth is revised down again and now stands at 8.7 per cent (8.9 per cent earlier), with Q4 growth slowing further to 4.1 per cent amid a mild Omicron effect and an unfavorable base effect. For Q4, private GVA growth remained steady, albeit low at 3.2 per cent. The expenditure side showed dismal private consumption, while government consumption and GFCF improved.
India's eight core sector industries showed a robust growth of 8.4 per cent in April compared to 4.9 per cent in March.
'RBI will act'
Emkay Global in a note said, "We slash our FY23 GDP growth estimate by 80bps to 7 per cent. The evolution of geopolitical reverberations and the magnitude of the energy supply shock are uncertain. This implies a protracted shortage of critical inputs, higher costs, shrinking corporate profitability and demand-curbing global policies. This will put pressure on the domestic growth story, which is yet to be broad-based and still lacks the next lever of secular growth."
According to DRE Reddy, CEO and Managing Partner, CRCL LLP, "In the next few months it will be observed that commodities, crude oil may pose a risk to global growth. A normal monsoon year will ease pressure on inflation. However, we expect the RBI to continue with its rate hike cycle to tame inflation".
Technically, the near term uptrend status of Nifty remains intact, said Nagaraj Shetti, Technical Research Analyst, HDFC Securities. “The present consolidation movement or minor downward correction could continue for the next one or two sessions, which is likely to prepare a base for another round of sharp up-move in Nifty for the near term. The next upside levels to be watched around 16,900-17,000.”