SGX Nifty indicates a gap-down opening for Sensex, Nifty

K. S. Badri Narayanan | | Updated on: Jun 20, 2022

Amid weak global cues, analysts longing for positives

Tracking global cues, domestic markets are expected to start a new week on negative note. SGX Nifty at 15,242 signals a gap down opening of over 75 points, as Nifty futures on Friday closed at 15,319.

As the US markets are closed today due to Juneteenth National Independence Day, analysts expect traders will remain cautious. Market desperately needs some positive news to arrest the slide, they said. However, most analysts believe only a limited downside for benchmarks as foreign portfolio investors will continue their sector rotation strategy.

Inflation worry

Shibani Kurian, Senior EVP & Head- Equity Research, Kotak Mahindra Asset Management Company, said: Inflation has clearly taken centre stage and is one of the key factors driving monetary policy stance and impacting the direction of equity markets.

"With headline US CPI inflation at 8.6 per cent y-o-y in May'22, and wage inflation at 5.2 per cent, the US Fed announced a 75bps hike in the Fed fund target rate to 1.5 per cent. The US central bank is clearly embarking upon a tight monetary policy stance, which is expected to drive up the policy Fed fund rate to 3.0-3.5 per cent by end-2022 and 3.5-4.0 per cent by end-2023."

Asia-Pacific stocks slump

Asia-Pacific stocks are extremely weak in early deal on Monday. Korean stocks down over 2 per cent while equities across Japan, Australia, Taiwan and Hong Kong fell between 0.8 and 1.5 per cent.

During May FPI sold equity worth ₹45,276 crore. The relentless selling continued in June and till June 17, FPIs had sold equity worth ₹28,445 crore. For CY 2022 till June, FPIs have sold equity to the tune of ₹2,02,244 crore.

FPIs sell everywhere

"FPIs have been selling heavily in other emerging markets like Taiwan, and South Korea too," said Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, adding that "The strengthening of the dollar and rising bond yields in US are the major triggers for FPI selling. Since the Fed and other central banks like the Bank of England and the Swiss central bank have raised rates, there is synchronised rate hikes globally, with rising yields. Money is moving from equity to bonds. In India, FPIs continued to sell in financials and IT where their holding is the largest"

According to Ruchit Jain, Lead Research,, The bears had a firm grip on our markets in the last two weeks wherein Nifty corrected from 16,800 to 15,200 in a short period of time. In these two weeks, the global markets too have corrected due to which our markets have reacted negatively. Post the recent correction, the momentum readings on the lower time frame chart have now reached the extreme oversold zone and such setups have usually resulted in pullback moves in the recent past.

Published on June 20, 2022
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