The markets are expected to open the new week on a negative note, amid mixed global cues. According to analysts, after a sharp recovery in the last few days, one can expect profit-booking to kick in. Though the domestic markets have discounted much of the negative news, they are still linked to global sentiment. According to them, the markets are expected to consolidate around current levels.

The Q1-FY23 results season began on a mixed note, with TCS disappointing, even as DMart (Avenue Supermarts) posted strong numbers. However analysts expect that, overall, the results will not be bad.

Mitul Shah, Head of Research at Reliance Securities, said: "While the markets are finding their rhythm, with the Nifty notching up gains, whether the upward trend is sustainable amid all the global headwinds, remains to be seen."

SGX Nifty at 16,127 (745 am) indicates a gap-down opening of about 100 points, as Nifty futures on Friday closed t 16,225. Asia-Pacific stocks are mixed, with Japan and Taiwan edging up, while stocks across Australia, New Zealand and Korea are down.

FPIs behaviour crucial

Analysts expect selling by foreign portfolio investors to slow down going forward.

"Early trends in FPI activity in July indicates a decline in selling by FIIs. For the first time in several weeks, FPIs bought equity worth Rs 2,150 cr on July 6. There are signs of selling exhaustion by FPIs.

Dr. V.K. Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said: The major factors driving FPI selling during the last two to three months have been the steady appreciation of the dollar and rising interest rates in the US. If the rupee consolidates at the current level which, in turn, depends mainly on the price of crude, FPI selling will come down."

Eyes on US Fed

Marketmen believe the US Federal Reserve will remain aggressive. The probability of a global slowdown caused by high inflation and firm rates has been talked about more in the last couple of weeks, said Dr Joseph Thomas, Head of Research, Emkay Wealth Management. But the recent fall in the commodity prices, especially oil, and the expectation that central banks may go slow on interest rate hikes, has restored some confidence in the minds of investors.

"The rise in the equity markets witnessed in the last few trading sessions of this week was based on this outlook of a probable moderation in inflation and, therefore, of rates. However, the actual inflation numbers will be released in the US and India in the coming week, and this number would be crucial in deciding the trajectory of the markets,” he added.

According to Vijayakumar, India's high trade deficit at $25 billion is an area of concern. "If the trade deficit continues to remain high, further depreciation of the rupee above 80 to the dollar is likely in the next two months. FPIs are likely to watch rupee movements before buying big in India."

Global headwinds

According to Mitul Shah, the depreciating rupee, widening trade deficit, selling pressure from FIIs and volatility in global crude prices will decide the market’s trajectory in the near-term.

"The progress of the monsoon has accelerated and will mitigate macroeconomic hurdles of grain production and food inflation. Additionally, fear of a global recession has been creeping up, which has led to a gradual fall of oil prices and softening of commodity prices, which were at record highs , post the start of the Russia-Ukraine war," he added.

Technically, too, most stocks are ruling above 50-EMA and some 200-EMA, thanks to the recent recovery, which is good if they hold on to crucial support levels, analysts added.

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