SGX Nifty indicates that the domestic market is expected to open in negative territory on Monday. Amid negative global cues on slowdown fears, equities are under pressure, said analysts. Besides, this week being the settlement week for F&O August contracts, they expect the market to see volatile trading.

Last week, domestic indices ended flat amid volatility despite opening on a strong note, said Vinod Nair, Head of Research at Geojit Financial Services. While better-than-expected CPI numbers and declining commodity & oil prices instilled optimism, a reversal in the FII trend, a strengthening dollar index, and the release of the Fed meeting minutes surprised the bulls, he added.

SGX Nifty at 17,670 indicates a gap-down opening of nearly 100 points, as the Nifty futures closed at 17,760 on Friday. The return of foreign portfolio investors as buyers helped the market remain resilient, said experts. Led by Nasdaq, US stocks closed on a weak note last week. However, Asia-Pacific stocks are mixed in early deals on Monday. While Japan's Nikkei, Korea's Kospi, Taiwan's Weighted Average and Australia's ASX are down, the Chinese markets are up, after its central bank, the PBoC cut the 5-year loan prime rate LPR by 15 bps, 1-year by 5bps.

China cuts lending rate

Despite the US Federal Reserve echoing a hawkish tone, experts believe FPIs will bet on India's long-term growth story, though they could see the possibility of their selling once again in the short-term due to current headwinds.

The RBI minutes showed that even while decision-makers were concerned about the impact of aggressive action, they were in favour of raising rates further. In Asia, the Chinese central bank surprised the market by cutting its interest rates after a weak set of economic data, Nair further said.

Chinese stock markets are up in early deals, as its central bank PBoC cut the 5-year loan prime rate LPR by 15 bps, 1-year by 5bps.

Betting on the festive season

However, analysts expect the Indian economy to remain strong due to the strong monsoon.

The recently concluded earnings season saw healthy sales growth, with some pressure on profitability arising from high energy prices, said Hemant Kanawala, Senior Executive Vice-President & Head Equity, Kotak Mahindra Life Insurance Company Ltd. Owing to the recent correction in crude prices, the pressure on margins should ease off over the next couple of quarters, he added.

"Going forward, all eyes will remain on domestic recovery. The upcoming festive season demand is something markets will watch out for. Festival season demand is expected to be buoyant as this is the first normal festival season post Covid-19 and the rural segment may see buoyancy on the back of a strong monsoon,” he further said.

According to Mitual Shah, Head of Research, Reliance Securities, "We expect FIIs to remain net buyers as valuations are comparatively reasonable, while India’s growth is high compared to other emerging nations. Though near-term negatives in terms of concerns of a depreciating rupee, widening trade deficit and volatility in global crude prices continue to exert pressure on the economy and equity markets, we expect a strong economic rebound, normalised commodity prices, inflation within a targeted range, and better visibility in 2HFY23."

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