Domestic markets to open weak as bears remain powerful

K. S. Badri Narayanan | | Updated on: Dec 20, 2021

Turkish Lira collapse, FPI selling, weak global cues to affect sentiment further

The sentiment towards domestic markets continues to be negative and bears are likely to tighten their grip further on Monday. According to analysts, rising inflation, US Fed;s unwinding of stimulus, input cost pressure for companies and lack of positive news are impacting market sentiment.

Heavy selling by foreign portfolio investors is giving no room for bulls to regain strength. Last week, FIIs sold shares worth ₹10,450 crore in the cash market and Friday was the 23rd straight trading day of FII selling. Though domestic institutions are trying to provide some kind of support to by buying shares worth ₹6,340 crore last week, that was not enough to arrest the slide.

SGX Nifty at 16,923, indicates that Nifty may surrender the psychological 17,000-mark. It indicates a 60-point gap down opening for Nifty futures, which closed at 17,023.50; Nifty closed at 16,985.20 on Friday.

Equities across Asia tumbled led by Japan markets. While Japan’s Nikkei and Korea’s Kospi slipped 1.7 per cent and 1.3 per cent, others such as Australia, Taiwan and Indonesia edged down between 0.3 per cent and 1 per cent.

Key factors

Global markets, Omicron Variant, the dollar index, and FII-behavior will be key factors to drive the market next week, said Santosh Meena, Head of Research, Swastika Investmart.

Meanwhile all eyes are on Turkish markets which is facing turbulence. Trading was halted trading twice on the Istanbul stock exchange on Friday even as the Borsa Istanbul 100 index fell as much as 7 per cent. Turkish currency Lira collapsed to a life-time low on Friday. Analysts fear, this will have a contagion effect, as FPIs will further sell and shift to safe-haven assets.

According to analysts, all eyes are on central bankers across the globe. The Bank of England lifted interest rates to 0.25 per cent from 0.1 per cent. “The European Central Bank would further slow purchases of assets under its Pandemic Emergency Purchase Programme in the first quarter of next year. But the ECB softened the blow by planning to raise purchases under a separate, existing programme in the second quarter, while ECB President Christine Lagarde reiterated that a rate increase in 2022 is unlikely,” said Mitul Shah, Head of Research at Reliance Securities.

Rahul Sharma, Co-owner Equity 99, said: “We see that these could be the last blow to the market and expect some upward move in markets in next week. Smallcaps and midcaps might lead recovery. Investors are advised to hold on to their holding and not panic. We continue to recommend ‘buy on dips’ strategy.”

Published on December 20, 2021
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