The domestic market is expected to open on a flat note with a negative bias, as analysts expect the consolidation phase to continue. The SGX Nifty at 18,810 indicates a flat opening as Nifty futures on Wednesday closed at 18,818.25. Analysts expect profit-taking in domestic markets as valuation is getting stretched. Besides, with US Fed maintaining its pause stance despite sounding hawkish, analysts say lack of trigger to keep market lacklustre and in a narrow range.
Edward Moya, Senior Market Analyst, The Americas, OANDA, said the US stocks initially tumbled after the Fed tried to deliver a very hawkish skip. A unanimous vote to pause the Fed’s rate hiking campaign also included a very hawkish dot plot. Wall Street is not happy with the Fed’s super hawkish projections. The Fed is concerned that wage pressures will remain as the labour market remains very tight. With the US banking system remaining resilient and robust job gains, the Fed needs to deliver more tightening and that is why the dot plots are pricing in two more small rate hikes.
The Dow Jones Industrial Average was down 232.79 points, or 0.7 per cent, while the S&P 500 and the Nasdaq Composite recovered to end in the green.
“The Fed statement and projections were very hawkish but Powell’s presser was a bit optimistic regarding their inflation fight and non-commital for a July rate hike,” he added.
Most stocks in Asia-pacific region are up in early deal on Thursday, though the gain is just marginal.
Given the strong domestic macroeconomic data, domestic markets should continue to see inflow from foreign portfolio investors, analysts said. Indian economy is clearly in a benign inflation regime for now as reflected in the continuing contraction in the WPI inflation in May-23 apart from the steadily declining headline CPI inflation. At -3.48% YoY, this is lower than the contraction seen during the pandemic disruption in May-20.
Suman Chowdhury, Chief Economist, and Head – Research, Acuité Ratings & Research, said, “In our opinion, the soft wholesale inflation trajectory is already factored in by the MPC in its latest macroeconomic assessment. “The pause in the benchmark interest rates by RBI MPC is likely to extend for another 2-3 quarters although the stance can change to “neutral” if the inflation print continues to be benign for another few months,” he said.
Dr. Joseph Thomas, Head of Research, Emkay Wealth Management, said, “The improvement in macroeconomic data should be supportive of risk assets over the near term and the momentum may continue.”
Options data suggest a broader trading range between 18,500 and 18,900, while the immediate trading range is expected to be within 18,600 and 18,800, said Ameya Ranadive, Equity Research Analyst, Choice Broking.
With the market indices approaching their all-time highs, it is expected that a period of consolidation will persist over the coming sessions, he added.