Stocks

Brace for volatility, Nifty may breach the 17,600-mark

KS Badri Narayanan Chennai | Updated on November 24, 2021

FPIs continue their selling of Indian shares; F&O expiry to add to uncertainty

Domestic equity markets are likely to open on positive note on Wednesday, amid mixed global cues. However, analysts are sceptical about the sustenance of the recovery and expect volatility to rise due to F&O expiry on Thursday.

The SGX Nifty at 17,633 indicates the momentum to continue at least in the opening, as Nifty November and December futures closed at 17,495.25 and 17,540.25.

Overnight the US stocks too closed on a mixed tone with Dow and S&P indices closing in the green, even as Nasdaq slipped 0.50 per cent. Asian stocks, in early deal on Wednesday, are mixed as benchmarks in Japan are down while Australia, Korea, the Philippines and Taiwan are up moderately.

FPIs advice sell on Indian equities

The big concern for Indian equities right now is selling by foreign portfolio investors. They are unrelenting in their selling. On Tuesday too, they offloaded shares in excess of over Rs 4,400 crore shares.

Global financial advisors such as UBS, Nomura, Goldman Sachs, Morgan Stanley and CLSA already said that Indian stock markets are trading at a rich valuation and advise investors to book profits. Latest to join the bandwagon is BlackRock Inc. which according to a Bloomberg report, is trimming its investments in Indian equities.

“Valuations are key right now,” Belinda Boa, head of active investments for Asia Pacific at the world’s biggest asset manager, said at a briefing. “Because of the outperformance we’ve seen in India this year, on a relative basis, we are starting to take profits” and becoming more positive on Chinese growth, the report added.

According to Amar Ambani, Yes Securities, “Structurally, our view remains bullish on the Indian equities. However, in the near term, there are signs of some exhaustion in the equity rally after the ferocious rise seen over the past few months. Sector rotation has happened and mid-caps have already massively rallied. FII inflows have also paused after hefty buying in August and September. This can be attributed to expectations of faster than expected normalisation of the Fed’s monetary policy."

Shrikant Chouhan, Head of Equity Research (Retail), Kotak Securities, said: "Buying in late trades helped the market to recover from the intraday volatile sessions. Nifty found support near 17,200 and reversed sharply. The short-term formation is still on the weaker side, but due to the extremely oversold situation, the market registered a technical bounce back".

Ambani added that the recent FII outflows can also be seen as a year-end phenomenon, but the flows are expected to return next year.

Published on November 24, 2021

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