The beginning of fresh week is unlikely to see any change of hearts for domestic equities, as bears are likely to strengthen their grip further. Indian markets are expected to see another gap down opening, as global sentiment remains weak.

SGX NIfty at 16,214 signals, a gap down opening of 200 points for Nifty futures, which on Friday closed at 16,419. As both central bankers across the globe started tightening the easy money flow, equity bulls are struggling to gain foothold, say analysts. The trend is likely to continue in the near term, as foreign portfolio investors continue their sell-off despite a huge pull-off almost in the last one year, they added.

Rising interest rates and dwindling liquidity remain the twin enemies of equities anywhere. The market traded lower today with losses in the range of to 1.50-2 per cent across sectors, and across market caps, said Joseph Thomas, Head of research, Emkay Wealth Management, adding that "the markets will remain under the spell of the central bank actions as also the rising concerns of a soaring inflation with potentially lower economic growth.

Series for rate hikes

According to analysts, although the Fed’s less hawkish rate hike of 50bps initially pumped in optimism, the need for a higher rate hike to tame elevated inflation levels wounded global markets with heavy selling. The Bank of England, while raising its interest rates, warned about a possible risk of recession. Further, the RBI’s sudden announcement of a 40bps increase in repo rate along with a 50bps increase in CRR, although anticipated, spooked investor confidence.

Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said: "FPIs continued selling in the early days of May also with a net sell figure of ₹6,723.59 crore through 6th May. Since markets have turned very weak globally FPIs may continue to sell perhaps with reduced volume."

'Valuation is not cheap'

However, even after the recent correction in the market, valuations are not cheap, he said. "Perhaps, if Nifty corrects another 5 per cent from the current levels, FPIs are likely to turn buyers. With aggressive Fed tightening, lockdowns in China and the Ukraine war lingering the situation is not favorable for a sharp turnaround in markets," he added.

Analysts expect the market to continue to see volatility amid pulls and pressures from directions.

Santosh Meena, Head of Research, Swastika Investmart Ltd, said the direction of global equity markets along with movement in the dollar index and crude oil prices will continue to dominate while inflation numbers of the US on May 11 and Inflation and IIP numbers of India on May 12 will also cause volatility in the market.

FIIs F&O holding dip

"If we look at the derivative data then long exposure in the index future of FIIs has dipped to a multi-month low of 22% which is extremely oversold whereas the put-call ratio of 0.74 is also indicating an oversold territory therefore we can expect a bounce back in the market near to 16200-16000 zone," he added.

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