Domestic markets likely to open on flat note despite weak global cues

Domestic markets are likely to open flat on Wednesday, amidst weak global cues. With lack of buying at higher levels, analysts expect the domestic markets will soon align with global sentiment. Besides the rise in whole-sale price index inflation too will keep investors on cautious mode, they added.

As the US is preparing to raise taxes by more than $2 trillion targeting wealthy individuals and profitable corporations, Wall Street is wobbling. All the three major US indices - Dow Jones, tech-focussed Nasdaq and S&P-500 indices – fell on Tuesday. Markets across Asia-Pacific region too slipped between 0.3 per cent and 1 per cent in early morning on Wednesday.

However, SGX Nifty at 17,417.20 presents a positive opening for domestic market. The Nifty futures on Tuesday closed at 17,384.95 on the NSE.

Siddhartha Khemka, Head - Retail Research, Motilal Oswal Financial Services Ltd, the market might consolidate for some time on account of fragile global cues.

“Valuations too have moved beyond comfort zones and hence could lead to bouts of profit booking and increase in volatility. But the overall sentiment in the domestic market remains positive, supported by improving economic data and positive earnings expectation. Good 1QFY22 earnings delivery has boosted hopes for a solid FY22 with 30%+ projected Nifty earnings growth, on the back of a strong 15% earnings growth in FY21.”

India’s Headline WPI inflation picked up to 11.4 per cent in August from 11.2 per cent in July after two consecutive months of easing. On sequential basis, WPI inflation was up by 1 per cent, the highest in 4-months to August. While sequentially primary food prices were lower than last month, non-food primary and manufacturing sector increases were large. Core inflation, excluding food and fuel component, posted a new series high of 11.2 per cent YoY. With input cost of companies increasing, avenues of absorbing the same seems limited. “This implies some likely pass-through to the retail side even as demand side pull remains weak. The RBI will remain watchful of this process but continue to see comfort from the CPI prints,” YES Bank in a note.

According to Nagaraj Shetti, Technical Research Analyst, HDFC Securities, the range-bound action continued in the market and this action could hint at a possibility of minor upside breakout of sideways range in the short term. The upper area of 17,500-17,600 is expected to be a crucial overhead resistance and one may expect profit booking emerging from the new highs. The immediate support is placed 17,260.”