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Bears assault to continue for domestic markets on Thursday as well, with global cues presenting another extreme negative day. Analysts expect that the Nifty may find it difficult to hold the psychological 16,000-mark. Despite sharp fall in recent days, analysts do not see any buying activity to emerge from foreign portfolio investors, who kept pressure on Indian equities, especially on small- and mid-cap stocks.
US stocks tumble
Dow Jones, which opened positive on Wednesday, slipped in deep red by closing. It edged down 326 points or 1 per cent, while the tech-focussed Nasdaq slumped over 3 per cent as inflation turned out higher than expected.
Ajit Mishra, VP - Research, Religare Broking, said: "Participants are closely eyeing US inflation data for cues and we’ll see the reaction in early trades on Thursday. Though the Nifty index has rebounded after penetrating the crucial support zone of 16,000 for a brief, we believe banking holds the key to further rebound. Keeping all in mind, we recommend keeping a cautious stance and suggest preferring hedged positions."
Asian stocks down
Following the US stocks, equities across Asia-Pacific tumbled between 0.3 per cent and 0.8 per cent. SGX Nifty at 16,020 in early deal on Thursday indicates another 200 points shave-off for NIfty at domestic markets.
Meanwhile, the earnings season continues to remain healthy, notwithstanding the challenges on multiple fronts. Nifty has corrected about 10 per cent from its recent high in April.
"On the other hand, midcaps and smallcaps have faced larger selling pressure – falling 13 per cent/17 per cent from their respective highs," said Siddhartha Khemka, Head - Retail Research, Motilal Oswal Financial Services Ltd.
Post this correction, Nifty is now trading near its 15 year LTA of nearly 18x while midcaps are trading in line with the Nifty. The weakness in the market is likely to persist till the concerns subsides. But still this correction has offered the opportunity to accumulate some good quality stocks from long term perspective," he added.
Global pain
According to Vinod Nair, Head of Research at Geojit Financial Services, said: Investors continue to remain wary despite global markets trading in green due to drop in domestic investors confidence & FII selling.
"The market turned volatile waiting for the release of April US inflation data, which is expected to cool down marginally. Inflation will continue to be elevated but the chance of major reactions is low because it has been factored in by the markets. The major determinant for market direction would be the pace of decline in inflation in response to the Fed measures," he added.
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