SGX Nifty indicates a positive opening but Asian markets are down

K. S. Badri Narayanan | | Updated on: Dec 06, 2021
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Omicron, FPI selling to anchor market direction

The new week is likely to open on a positive note for domestic market, indicates SGX Nifty. The strong GDP and PMI (Manufacturing & Services) numbers are likely to keep the market sentiment positive. However, global markets are still negative in early deal on Monday, and with foreign portfolio investors unrelenting in their selling, one could see downtrend as the day progresses, said analysts.

India’s annualised GDP growth came at 8.4 per cent in Q2 FY22.

The volatility is likely to continue amid Omicron uncertainty, RBI credit policy, and macroeconomic numbers, said Santosh Meena, Head of Research, Swastika Investmart Ltd. "There are lots of news flows on the Omicron variant, which is causing volatility in the market, while on the domestic front we will have the outcome of an important credit policy of RBI that is scheduled on December 8."

SGX Nifty at 17,268 (7.40 am IST), indicates a flat-to-positive opening for Nifty, as Nifty December futures on Friday closed at 17,239. However, equities across Asia-Pacific are ruling in red, albiet marginally between 0.10 per cent and 0.60 per cent.

Focus on RBI meet

"It will be important to see how RBI will keep a balance between rising fear of omicron, strong growth, higher inflation, and hawkish US Fed," he added.

According to K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, Stretched valuations, Fed's observations on accelerating tapering and concern on inflation and the potential impact of the Omicron variant on economic activity and corporate earnings are the factors influencing FPI activity.

"In early November many large foreign brokerages had downgraded India from overweight to neutral on stretched valuations. Even after the recent correction, Nifty is trading at 20 times FY23 earnings, which is much higher than the historical average of around 16. So, FIIs may continue to sell, though at a subdued pace," he added.

PMI activity

India’s sustained economic revival after the second Covid wave continued to reflect in PMI manufacturing with the index rising to a 10-month high of 57.6 in Nov-21 from 55.9 in Oct-21, staying well above its long run average of 53.6. PMI services stood at 58.1 in Nov-21 marginally lower as compared to 58.4 in Oct-21 led by improving demand conditions in the domestic market, re-opening of establishments and enhanced marketing efforts.

"Overall, we expect PMI manufacturing and services to remain strong in the remainder of FY22 amidst a near complete removal of lockdown restrictions, ebbing of infections, improved consumer sentiments and steady progress on vaccination," said rating agency Acuité Ratings & Research.

According to experts, only thing certain in the current market situation is volatility. They warned traders to be cautious, as the stock price could swing wildly resulting in a huge loss within a fraction of minute. During this period it is better to stay away from day trading, they added.

Published on December 06, 2021

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