Snake-and-ladder game to continue at domestic markets

Domestic markets are expected to open with negative bias on Wednesday. The snake-and-ladder game is likely to continue at the bourses, amid mixed global cues. Gifty Nifty at 19,354 signals a gap-down opening of about 50 points for Nifty

Asia-Pacific stocks are flat but largely positive in early deal on Wednesday despite a mixed end in the US markets overnight.

Vikas Jain, Senior Research Analyst at Reliance Securities, said: The sell-off in US government debt continued to hit the world’s largest bond market, with yields on benchmark Treasuries hitting new 16-year highs. The yield on the 10-year note rose as much as 0.1 percentage points to 4.35 per cent, surpassing a previous high in October and sending it to the highest level since November 2007.

According to Vinod Nair, Geojit Financial Services, the influence of higher bond yields and concerns about potential rate hikes in the US is prompting FIIs to withdraw funds from the domestic market, contributing to the market’s volatility.“ 

Amnish Aggarwal - Head of Research, Prabhudas Lilladher Pvt Ltd, said:  NIFTY has given more than 14% return in FY24 YTD as India attracted more than $16.5 billion of net FII flows. India seems well poised for growth in longer term, however coming months will be a real test for the economy and markets given EL Nino impact on crops and Inflation as food inflation has spiked to more than 7.4 per cent and rainfall outlook remains subdued; and dim possibility of further cut in interest rates with some possibility of an increase in second=half.

“We expect markets to start factoring in political risks as election related activity picks -up with state elections in November and Lok Sabha elections in April 2024. Economy is getting a big push from Union Govt induced capex even as rural India is showing faint signs of recovery and urban discretionary demand remains tepid. Expected interest rate hike in US and its impact on INR/USD with impending political and inflation risk can impact capital flows,” he said and adding that high inflation can be a political hot potato in an election year, forcing govt to slow down capex. 

“We remain positive on Auto, Banks, Capital Goods and Healthcare. We cut NIFTY target to 20,735 given cut in earnings (impact of floods and late Diwali in 2Q) and expect markets to consolidate ahead of 2024 elections. We advise stock specific approach and avoiding sectors / companies with weak fundamentals and lack of business moats,” he further said.

COMMENT NOW