Domestic markets are likely to open extremely bearish on Friday amid gloomy global markets. As the inflation rose to 40-year high in the US, analysts fear the US Fed will turn more hawkish by raising the interest rates 50 bps in March. Overnight, the Dow Jones Industrial Average slumped 526.47 points (.47 per cent) while S&P-500 and the Nasdaq crashed 83.12 points (1.82 per cent) and 304.73 points (2.10 per cent). SGX Nifty at 17,440 indicates that Indian market to too slip around one per cent. The Nifty futures on Thursday closed at 17,617. While Japan markets are closed today for holiday, rest of the Asia-Pacific stocks are down between 0.8-1.2 per cent in early deal on Friday.

RBI remains dovish

Meanwhile, Reserve Bank of India on Thursday remained more dovish by keeping the fixed reverse repo rate (RRR) unchanged, assuaging markets over any material tightening of financial conditions ahead as global dynamics change.

The gradualist approach toward liquidity/rate normalisation may be challenged by various global and domestic push-and-pull factors, said Emkay Global. Nonetheless, a huge bond supply in FY23 (even with an upside surprise on tax revenues) will require the central bank’s invisible hand in a more visible fashion, implying a return of pre-committed GSAPs. “An uncomfortable RBI may neutralise that with CRR hikes, albeit with some communication challenges. In the medium term, the RBI may let the exchange rate adjust to the new macro realities, letting it act as a natural stabiliser to policy reaction functions,” it added.

Key headwinds

According to Mitul Shah, Head Of Research at Reliance Securities, the earnings season is about to end soon, with revenue is largely in-line with estimates so far, however higher commodity prices taking toll on margin and profitability to some extent. “In the past, we have observed that volatility in market persists till the announcement of first rate hike by Fed, post which it settles down and flow in equities resume. Equities would continue to outperform with double-digit returns,” he added. Besides rake hike fears and sucking of easy liquidity by the US Federal, analysts also see the standoff between Russia and the West over Ukraine could act as a big headwind.

Technically, Shrikant Chouhan, Head of Equity Research (Retail), Kotak Securities, said: the support for Nifty has shifted to 17450 from 17350, and as long as the index is trading above the same, the uptrend formation will persist up to 17700-17750. However, the uptrend could be vulnerable if the index falls below 17450 or 50-day SMA, he added.

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