SGX Nifty indicates flat opening

Asian stocks are reeling under pressure as the volatile US stocks closed on mixed note. ,However, SGX Nifty at 17,240 indicates a flat to positive opening for domestic markets on Tuesday. Nifty futrues on Monday closed at 17,205.

Analysts expect value buying in some large-cap beaten down stocks at lower level that will help market from a free fall. However, volatility will increase amid strong selling from foreign portfolio investors, they said.

VIX jumps

According to Siddhartha Khemka, Head - Retail Research, Motilal Oswal Financial Services Ltd, India Vix, volatility index on the NSE, jumped sharply by 19 per cent to 16 level, indicating heightened volatility.

“Emerging uncertainty around several mid and small size (Silvergate bank, Sillicon Valley Bank, Signature bank and First Republic Bank) have created nervousness among global investors about the health of the US banking sector. Expect elevated volatility until clarity emerges on the potential extend of the crisis,” he said

The US Fed’s emergency meeting to control the damage would be crucial for the markets. Apart from this release of US inflation data along with ECB meeting during the week would be keenly watched, he further said.

Meanwhile, domestic inflation data came in at expected elevated levels. Analysts now expect RBI to increase rate in its next meet by a quarter percentage point.

February consumer price index (inflation) remained high at 6.4 per cent despite mild sequential easing in food inflation, with core inflation at 6.3 per cent.

The world order has again evolved dramatically, with higher global (and Indian) inflation prints colliding with new uncertainties regarding the US banking system, said Madhavi Arora, Economist at Emkay Global.

“We see Q4FY23 inflation overshooting the RBI’s forecast by 45-50bps, albeit we retain our FY24 forecast at 5.2 per cent at present. April will likely see another 25bps hike amid consistent global policy rates repricing, the pace of global inflation and banking system evolution, and the case for impending recession - all of which will influence DM central bank policy,” she said.

The RBI will continue to remain non-committal on the future rates path, as the fluid global situation demands frequent macro re-assessments.

Markets in rough weather

Currenty, there are no positive triggers for market to revive. All news pouring in are on the negative side only, analysts said.

“Looking at the market mood fall there are few factors resulting from the selloff with low to no positive triggers in Indian markets, global uncertainty in banking sector after SVB issues and El Nino effect for 2023 which could raise concern over rural demand and Nifty earnings,” said Prashanth Tapse Research Analyst Sr VP Research Mehta Equities Ltd.

As per market reports, El Nino, whenever it has occurred, has left a considerable impact on rains in India, leading to below normal rainfall across the country. The probability has been set at a fairly high level approx. 55-60 per cent and it’s expected to set in between June-December 2023 as per market reports and this stands true, there would be drought like situations too due to the phenomenon leading to crop loss, resulting in rising food prices and inflation again, he warned.

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