Domestic markets are likely to open on a negative note on Wednesday, amid weak global cues and relentless selling by foreign portfolio investors in the cash segment. According to analysts, the US stocks closed deep in the red despite a decent set of numbers from Microsoft and Alphabet (Google’s parent).

Banking fears, after First Republic Bank reported that its deposit dropped 40 per cent, the Dow fell 344.57 points, or 1.02 per cent, to end at 33,530.83. The Nasdaq slumped 1.98 per cent to 11,799.16 and the S&P 500finished 1.58 per cent lower at 4,071.63.

SGX Nifty at 17,755 indicates the market to open in the negative. Most equities across the Asia-Pacific region are down in early deal on Wednesday. 

More pain ahead?

John Normand, Cross Market Strategist and Former MD & Head - JP Morgan, in a conference with Emkay Global said, hard landing seems to be more plausible and will require a multi-quarter recession of corporate profits, which will lead to job losses with a lag, meaningfully pulling down the US economy by 2024. The strength of HH accumulated savings and a tight labour market may not be the saving grace, as a profits recession leads the real sector.

“Even with the Fed’s terminal rate being lower post SVB than initially estimated (~6 per cent), the HH and industrial credit conditions will become tighter amid the regional banking crisis, thus nullifying the lower terminal-rate impact,” he added.

The equities and rates-market disconnect is a common feature of end-of-cycle dynamics and Normand sees the credit market being impacted next. “The risk-reward will start tilting by end Q3/Q4, led by sharp repricing in equities,”he warned.

Rate-hike fears

Amid all these for fears, FPIs remained sellers for the seventh straight day in the cash segment.

According to Shrikant Chouhan, Head of Equity Research (Retail), Kotak Securities Ltd, cautious optimism prevailed as sluggish to negative global markets’ sentiment prompted traders to take selective bets in metals, oil & gas, and financial stocks. “The bigger concern is that the rate hike cycle in the US and European nations is likely to continue, which may further push key economies into a slowdown phase and hurt growth,” he said..

Analysts said that the focus is completely individual stocks. With F&O rollover ahead of expiry on Thursday and Q4 corporate results will set the direction for individual stocks. 

“Overall, the Indian stock markets are trading in a range-bound fashion, with no clear trend in the near term. Traders and investors are advised to adopt a cautious approach and wait for a decisive move above the resistance or below the support levels before taking any significant positions,” said Ameya Ranadive, Equity Research Analyst, Choice Broking.

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