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Wall Street edged higher on Tuesday amid an optimistic earnings outlook and a fall in energy prices. Asian markets were trading mixed in morning trade.
However, volatility is likely to persist in the near term owing to energy prices, geopolitical concerns, and rising US bond yields, according to analysts. Oil prices rose about 1 per cent on Wednesday morning after a sharp fall on Tuesday, following the International Monetary Fund cutting its economic growth forecasts. Investors are also closely watching developments in the Russia-Ukraine crisis and currency movement.
Santosh Meena, Head of Research, Swastika Investmart Ltd said, “The long-term structure of the Indian market is bullish. However, we are going through a lot of bumps in the short-term, including geopolitical tension, higher commodity prices, and rising interest rates. Inflation is the biggest challenge and if growth loses track, it could become the biggest sentiment dampener.”
“Some economists point towards global stagflation, a situation of low growth and high inflation. Otherwise, the Indian market is going through a transformation to outperform. We are bullish on the domestic market for the next three-five years despite some global risks. Therefore, every correction should be taken as a buying opportunity. However, sector and stock selection will be the key in such a market,” said Meena.
FII selling continued
Foreign institutional investors (FIIs) continued their selling spree on Tuesday.
FIIs net sold shares worth ₹5,871.69 crore, while domestic institutional investors (DIIs) net purchased shares worth ₹3,980.81 crore on April 19, provisional data from NSE said.
From a technical perspective, according to Ruchit Jain, Lead Research, 5paisa.com, Tuesday’s low of 16,840 coincides with the ‘200 EMA’ on the daily chart and a 50 per cent retracement level of the previous up-move.
“If the index breaches this support, we could see it extend its correction towards the 61.8 per cent retracement level, which is placed around 16,600. On the flipside, 17,250-17,300 will be seen as an immediate hurdle that needs to be surpassed to regain any strength. Looking at near term volatility, traders should avoid aggressive positions and look for stock specific opportunities on both sides of the trade,” said Jain.
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