The start of a fresh week for the Indian stock markets is likely to be rosy, as global cues in the early deals on Monday present a green pastures for bulls.The SGX Nifty at 16,400 indicates a continuation of rally, as Nifty futures on Friday closed at 16,253. Almost all equities across Asia-Pacific region too are trading higher.
Last week, the US stocks witnessed one of the strong recoveries on Friday after opening sharply lower. The Dow Jones closed at 31,1261.90 after dipping to a low of 30,365.80. Similarly, Nasdaq ended the week in red at 11,354 (but recovered from a low of 11,035) and S&P 500 at 3,901.36 (3,810.35 day's low).
Analysts expect the market to remain volatile due to settlement of F&O week as well as the Government's initiatives to check inflation by cutting down the duty on petrol and diesel products.
Petrol products price cut
The Centre on Saturday finally slashed excise duty on petrol and diesel by ₹Rs 8 and ₹Rs 6 per litre respectively. This will reduce the price of petrol by ₹9.5 per litre and of diesel by ₹7 per litre.
IFA Global Research Academy said: this is expected to cool off the surging inflation pressure in the near term. The RBI surplus transfer to the government was sharply down at ₹30,307 crore and the added cut in the petrol prices are expected to impact the Govt revenue and thereby Budget maths.
"With concerns over an economic slowdown and rate hikes across the globe, investors will continue to invest with caution," it added.
FPIs selling adds pressure
According to experts, the continuous selling by foreign portfolio investors is likely to add pressure on Indian equities.
FPIs continued their selling spree in May. According to NSDL data, up to May 20, FPIs sold equity worth ₹37,216 crore through the stock exchanges taking their total selling in 2022 to ₹1,65,739 crore.
"The major factor behind the relentless FPI selling is the appreciation of the dollar which has taken the dollar index above 103. Also, India is the major emerging market where FPIs are sitting on big profits and the market is very liquid to absorb FPI selling. Since the mother market, US, is weak and dollar is strengthening, FPIs are likely to continue selling in the near term," said Dr VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
Technical bounce back?
Technical analysts believe the short-term outlook turned positive. "Since the short-term trend has now changed to sideways. A move above 16,400 could then lead to a decent up move towards 16,800 while a break below 15,700 would resume the downtrend," Ruchit Jain, Lead Research, 5paisa.com.