Despite a remarkable recovery in the US market, Indian markets are likely to continue the downtrend. SGX Nifty at 17,005 indicates that Nifty may open below the 17,000-mark. Nifty Jan Futures on Monday closed at 17,151.65 and Feb futures at 17,188.25, signalling that Nifty may see a gap-down opening of about 150 points.

However, most analysts said that though volatility will rise ahead of US Federal Reserve's two-day meet (Tuesday and Wednesday) and F&O settlement on Thursday, they expect stability in the near term due to a sharp fall that provided value buying opportunities in some of the A-group stocks.

Global sell-off

Divam Sharma, Founder of Green Portfolio, a SEBI-registered PMS advisory provider, said: "We see Indian markets following the global course with sell-offs across new age technology companies, and stocks trading at high valuations."

According to him, the worst of fear of rate hikes, inflation, and covid spread is getting priced in. "The markets can reach a bottom soon as we see the actual event of interest rate increase happening," he said and added "Indian markets will continue to remain on the upper side of valuations and attract foreign capital over the coming years."

The Dow Jones Industrial Average swung after slumping over 1,000 points recouped sharply to end 0.29 per cent higher. Nasdaq, which crashed 5 per cent on Monday, too saw a strong recovery and closed 0.63 per cent higher while S&P too staged smart recovery to close 0.28 per cent higher.

However, there was no respite at Asia-Pacific markets which were in deep red on Tuesday. While Nikkei slumped almost 2 per cent, Korea's Kospi plunged 2.14 per cent. Australian markets too crashed 2.3 per cent in early deal on Tuesday and Taiwan slipped 1.27 per cent, as investors fretted over possible conflict between Russia and Ukraine. Inflation worries across the region continue to haunt equity investors.

According to analysts, some foreign portfolio investors who took a leveraged bet on crypto currencies are unwinding their position elsewhere, including equities, to meet margin commitment.

The reason for the fall in index heavyweight stocks was massive selling by the foreign portfolio investors (FPIs) as they sold index futures worth ₹1,572 crore and stock futures worth ₹1,093 crore on Monday. In the cash market, they sold equities worth ₹3,750 crore were awaited. During the month, FPIs have sold ₹9,956 crore worth stock futures and ₹7,360 crore worth index futures, as per exchange data. Till last week, FPIs sold cash stocks worth ₹15,563 crore this month so far. 

FPIs on sell mode

According to Abhay Agarwal, Founder, Piper Serica, a SEBI-registered PMS, Global investors are right now extremely sensitive to the Fed commentary that will become available mid-week. Till then, we expect that leveraged positions will continue to be unwound, sharply and forcefully in some cases, leading to further sharp corrections.

“As we can assess, the genesis of this correction is in the excessive speculation in crypto currencies that drove the prices to unsustainable levels. The prices have sharply corrected and most of the cryptos are now more than 40 per cent lower from the top,” he added.

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