Market may open positive amid strong Asian markets

KS Badri Narayanan Chennai | Updated on November 01, 2021

Eyes on FPIs, retail investor behaviour

November is set to start on a bright note for the beaten down Indian stock markets, with global markets presenting positive signals. However, analysts say, domestic markets will see profit-booking on every rise, as FPIs remain in sell mode.

Mixed economic data, especially lower core sector data, will keep the market in a narrow range with a downward bias, added analysts.

SGX Nifty at 17,794 indicates an 80-point gap-up opening for Nifty futures, which closed at 17,715 on Friday on the NSE. Asian stocks, especially Japan (due to a good show by the ruling party in the election), jumped in early deals on Monday. While the Nikkei jumped over 2 per cent, others in the Asia-Pacific region gained between 0.4 and 0.8 per cent. US stocks, too, closed in positive territory on Friday.

Suman Chowdhury, Chief Analytical Officer, Acuite Ratings & Research, said: “Growth in the core sector has started to normalise with 4.4 per cent YoY growth in September 21 as compared to 11.5 per cent YoY in August 21, with the lower effect of a favourable base."

In addition, a slowdown in the recovery of the core industrial sector is clear from the fact that all the eight core sectors without exception have shown a sequential decline. "While we continue to believe that the government’s thrust on the infrastructure segment, progress in vaccinations, along with strong export demand will continue to bolster overall industrial activity over the next few quarters, the September 21 core sector data has come as a negative surprise and highlights concerns on higher commodity prices and raw material shortages,” he added.

According to Santosh Meena, Head of Research, Swastika Investmart Ltd, foreign portfolio investors sold shares worth Rs 15,700 crore last week in the cash market, while they sold around Rs. 25,500 crore in October. "FIIs are not selling in the Indian market because of negative cues, rather recent strong outperformance by the Indian market is leading to mean reversion where recently Morgan Stanley and Nomura downgraded the Indian market to equal weight in a tactical shift," he added.

The market is heading into the festival season with a mood of profit booking in a truncated trading week on account of Diwali.

Retail investors, who were till now supporting the secondary market, may shift to the primary market with a flood of initial public offerings, including those of PB Fintech and Paytm coming out this week. Analysts fear that IPOs will suck out liquidity from the secondary market and stocks will fall freely if FPIs aggravate their selling.

Besides, so far, the results by India Inc is only a mixed and some clearly indicate margin pressure due to rising input costs, they added.

Published on November 01, 2021

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