Domestic stock markets are likely to open on a flat note with a negative bias on Wednesday, amid volatility. Analysts say they are still clueless about the market direction in the short-term, but it is certain to remain volatile till the outcome of the US Federal Reserve’s meeting at Jackson Hole is known.

Besides, individual stocks are likely to see heightened volatility ahead of F&O monthly contracts settlement. Rising crude oil prices and other essential commodities will also keep traders on edge.

The market is expecting hawkish comments from the Fed chair Jerome Powell at the Jackson Hole symposium on Friday, said Mitul Shah - Head of Research at Reliance Securities.

SGX Nifty at 15,760 indicates a downward bias for the market. Equities across the Asia-Pacific were mixed in early deals on Wednesday. While the Japanese and Chinese markets are down, benchmarks at Korea, Australia and Taiwan have eked out marginal gains. US stocks ended weak overnight, after swinging between gains and losses through the day.

Mixed global cues

“Global markets were mixed in cautious trade ahead of the US Fed’s economic symposium in Jackson Hole later this week. Even the PMI data for Germany and France fell below 50 level, though they were slightly better than expected. The market is increasingly concerned that the US Federal Reserve will continue to ramp up interest rates to fight inflation. Yesterday, the US 10-Year Bond Yield to an over 1-month high, to close above 3 per cent, The US Dollar Index closed at a 2-year high at 109 and the US Volatility Index (CBOE US Vix) climbed up by 15 per cent,” said Siddhartha Khemka, Head - Retail Research, Motilal Oswal Financial Services Ltd.

"Fear of uncertainty is visible in the market as they move with high volatility, led by weak signals from global peers, while a stronger domestic economy is providing some comfort," said Vinod Nair, Head of Research at Geojit Financial Services . Global markets were under pressure, with a spike in European energy prices and rate hike fears ahead of the Jackson Hole gathering, he added.

‘Buy on dips’

However, analysts are betting on the India growth story and are advising investors to buy Indian stocks on dips.

Jitendra Gohil, Head of India Equity Research, and Premal Kamdar, Equity Research Analyst, Credit Suisse Wealth Management, India, in a note said: “After equities staged a sharp rebound recently, India’s (Nifty 50 Index) 12-month forward P/E valuation has expanded to 19.5x and is now trading at one standard deviation above its 10-year average.

"Given that the 10-year US government bond yield (up 40 bp in the month to date) has started to rise again, a valuation correction could be possible in the near term. Nonetheless, any steep correction should offer a buying opportunity, as India's medium-term growth outlook is still attractive compared to other countries," they added.

Key risks

While India’s dwindling balance-of-payment situation and subsequent weakness in the INR are the key risks, the recent correction in commodity prices, especially Brent oil (down 10 per cent MoM), should help alleviate some concerns, said CS analysts. "We continue to maintain a mild overweight position in mid-cap stocks in the context of our India portfolio," they added.