After a sharp rally in the last four days, Indian markets are likely to see a moderation in the rally. SGX Nifty at 16,605 indicates a gap-down opening of about 40 points as Nifty futures closed at 16,643 on Monday. Equities across Asia Pacific region are flat in early deal on Tuesday.
Analysts expect the market is waiting for further clues before taking a clear direction.
“Though the markets have bounced back, inflation and central banks action globally would hold the key for the sustenance of this momentum,” said Siddhartha Khemka, Head-Retail Research, Motilal Oswal Financial Services Ltd.
Volatility index cools down
“Nifty has formed a bullish candle on daily scale and needs to hold above 16666 zones for an up move towards 17000 zones whereas supports are placed at 16400 zones. India VIX has cooled down sharply to below 20 levels which is supporting the bullish tone in the market,” he added.
Analysts do not expect big selling from FPIs. According to market experts, most of the negative news are discounted by market participants. They expect slowdown in FPI selling and small accumulation by then in large-cap stocks.
Vinod Nair, Head of Research at Geojit Financial Services, said: “A near-term trend reversal is visible in the domestic market, supported by valuation comfort and positive trend in the global counterparts.”
‘Positive run to continue’
’The US stocks were boosted on softening inflation worries which will be a crucial factor in deciding the tone of the upcoming Fed policy meeting. The easing of long-running lockdown in China also helped in lifting the sentiments across Asian markets, he said adding that “The market is expected to have a positive run in the near-term; however, the impact of central bank policies will be a key factor to be monitored.”
Prashanth Tapse, Vice-President (Research), Mehta Equities, said that strong value-based buying interest was witnessed in midcap stocks, which had corrected recently.
“Technically, the new setup is clearly pointing upside towards 16800-17000 on the Nifty. All eyes will be on RBI’s forthcoming policy. The central bank is expected to tighten monetary policy and raise interest rates to tackle inflation in the year ahead,” he added.