Domestic markets are expected to open on a flat note on Friday. After a battering in the last few days, the market is likely to stabilise around current levels, said analysts. GIFT Nifty at 19,500 indicates a flat-to-positive opening for domestic markets.

Meanwhile, Asian stocks are mixed in early deals on Friday; US stocks closed marginally down on Thursday amid volatile trading conditions.

Roller-coaster ride

According to SBICAP, “August is a turbulent month historically for global markets, and the Fitch downgrade of the US from AAA to AA+ has meant that we are on a roller-coaster yet again.” The downgrade came amidst heightened concerns on sovereign debt, even as growth prospects have improved. The immediate aftermath has seen a strengthening of the USD amidst higher yields. Whether these trends will mean increased aversion to risky EMs (where equities have seen a rout) is a story yet to unfold, it said.

Experts believe that the consolidation phase is likely to continue. The recent fall provided buying opportunities in select counters, they added. The underlying strength in domestic economic activity will attract inflows into Indian equities, they said.

India’s services sector continued to perform well in July, as total sales increased at their fastest rate since June 2010, aided by a substantial improvement in international demand, a private survey showed. The seasonally adjusted S&P Global India Services PMI Business Activity Index stood at 62.3 compared with 58.5 in June. The composite PMI rose from 59.4 in June to 61.9 in July.

Also read: Stocks to watch on August 4, 2023

Fed rate cut soon?

Mayank Mehraa, smallcase manager and principal partner at financial consultancy Craving Alpha, said: “Over the past two days, global markets have experienced a significant correction, triggered by Fitch’s decision to downgrade the US’s credit rating. However, despite these short-term fluctuations, it is crucial to consider the positive economic indicators observed during the June quarter results for most companies in India and the US.”

Given the downgrading of the US credit rating, there is a possibility that the Federal Reserve (FED) might be compelled to take action and finally implement a rate cut, potentially putting an end to their previous rate hike cycle. This move could have implications for the global financial landscape and may impact investors’ decisions in the near future,” he added.

However, analysts see profit-taking capping any pull-back rally.

Deepak Jasani, Head of Retail Research, HDFC Securities, said: We could witness selling pressure on every rise, with large-caps facing the brunt.”