Domestic stock markets are likely open the week on a weak note as global stocks are wobbling under selling pressure. Analysts expect that the market is expected to remain dull in early part of the week.
According to analysts, FPIs may indulge in sector rotation amid high valuation. The current rally appears exhausted and profit-booking by big investors is on the cards.
Ruchit Jain, Lead Research, 5paisa.com, said: “In last one week, Nifty has seen some correction from the highs posted on December 01. If we look at the data, this correction is primarily due to profit booking with unwinding of long positions by FII’s in the index futures segment. Their Long Short Ratio has reduced from about 76 per cent to 60 per cent in this period.”
SGX Nifty at 18,528 signals flat-to-negative opening for domestic markets. Nifty futures on Friday closed at 15,583.65.
Rohit Agarwal, Executive Vice President & Equity Fund Manager, Kotak Life Insurance Company, said: “The markets are likely to take a breather in the short-term after delivering very good returns post Covid. They are likely to see some drawdown or some time correction.”
Asian stocks are also down in early deal on Monday. US futures, even after a witnessing a sharp drop on Friday, are also ruling weak.
Longest-ever rally
According to Agarwal, the current rally in the Nifty has been the strongest since its inception.
“Nifty has given positive returns YTD, and if it doesn’t give up all those gains till the end of this month, 2022 will end up as the 7th consecutive calendar year with positive gains. That would be the longest ever streak since Nifty’s inception,” he added.
VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said: “In the near-term, FPIs are likely to make only modest purchases in performing sectors and may continue to sell and book profits in sectors where they are sitting on big profits.” More money is likely to move into cheaper markets, he added.
“The decline in the dollar index to below 105 was the major factor that triggered inflows. There is a trend of money moving into cheaper markets like China and South Korea where the valuations are compelling now. Despite India is continuing to attract foreign capital, the high valuations will be a deterrent,” he said.