SGX indicates 100-point gap-up opening for Nifty

K. S. Badri Narayanan | | Updated on: May 16, 2022

FII selling, inflation likely to keep the markets on the edge

The Indian stock market is likely to begin the week on a positive note. SGX Nifty at 15,890 indicates a gap up opening of about 100 points for Nifty. Stocks across Asia-Pacific, too, trade in the green, led by Japan's Nikkei that gained over one per cent.

Analysts expect the "over sold" market will stabilise at current levels in the near-term.

Lingering concerns over the weakening rupee, global interest rate hikes, elevated inflation numbers and lockdowns in China kept the markets on the edge.

Rate hike on cards

Analysts expect Reserve Bank of India to increase the rate once again in June given the elevated inflation levels.

The D-street is expecting another rate hike by the RBI in June given the rising inflation in India and worldwide, said Prashanth Tapse, Vice-President (Research), Mehta Equities Ltd.

"The US Fed has already cautioned against an aggressive policy stance in order to bring inflation under the Fed’s comfort zone of 2 per cent,” he added.

FPIs pull out

Unless foreign portfolio investors stop selling, Indian equities will continue their downslide, fear marketmen.

FPIs pulled out a little over ₹25,200 crore from the Indian equity market in the first fortnight of this month. They remained net sellers for the seventh straight month till April, withdrawing over ₹1.65 lakh crore from Indian stocks.

Relentless FII selling in the domestic market has added to the overall downtrend, said Siddhartha Khemka, Head-Retail Research, Motilal Oswal Financial Services Ltd.

"While the markets are oversold, we expect both volatility and weakness to continue this week as well given the weak global cues. Also continuous FII selling in Index heavyweights could limit upside on any possible bounce," he added.

Vinod Nair, Head of Research at Geojit Financial Services, said: "We can expect stability in the market as FIIs selling reduces factoring inflation & Fed policy. On the other hand, DIIs have lost their confidence after bearing continuous losses. Given the current volatility in the market, investors prefer defensive sectors like IT and pharma supported by the weakening rupee. Going ahead, the major determinant for market direction would be the pace of decline in inflation in response to the Fed measures."

Published on May 16, 2022
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