Dalal Street corner: Nifty, Sensex close holiday-shortened week with 4% cuts; what should investors do on Monday?

The Indian markets closed with a cut of nearly 4% in a holiday shortened week ended May 6,2022, as major central Banks across the world resorted to interest rate hikes in order to tame rising inflation. Domestic equity benchmarks Nifty50 and the Sensex ended lower by 4% and 3.9% respectively in the week gone by. Out of the total four trading sessions that the market saw this week, the headline indices closed in negative territory thrice and ended flat with positive bias on one occasion.

BSE Power and Nifty CPSE were only notable gainers this week, while consumer durables and realty were the worst hit.  

On Friday, of the total 3460 stocks that traded on the BSE, only 842 advanced, while as many as 2513 declined. A total of 105 stocks hit a 52-week low, 294 stocks touched the lower circuit while 56 stocks traded on a fresh high on the BSE on Friday.  

Meanwhile, the broader Nifty 50 and the Sensex ended lower by 1.63% and 1.56% respectively, largely pulled down by realty, IT, metal and financial services stocks. The two indices closed at 16,411 and 54,835 respectively.  

As the market continues to exhibit high volatility amid inflation fears, geopolitical crisis and earnings season, here is what experts make of the current trends in the market and recommend what investors should do going forward.  

Vinod Nair, Head of Research at Geojit Financial Services. 

A steep crash in the US stocks as the market evaluated the need for a higher rate hike to tame elevated inflation levels wounded global markets with heavy selling. The Bank of England, while raising its interest rates, warned about a possible risk of recession, aggravating investor fears. This period of volatility is the time for smart money to look for opportunities with buy-in-dip as the strategy with a focus on sectors that are expected to be least impacted by inflation & yield rise. 

Sunil Nyati, Managing Director, Swastika Investmart Ltd.  

Stock markets throughout the globe have become extremely fragile due to the entrenched inflation and the possibility of harsh measures by the central banks to tame the same, further other factors like geopolitical tensions, stagflation risk, and global economic growth slowdown have spooked Indian Investors and this led to a sharp fall in Sensex and Nifty. The sudden Repo Rate and CRR hike by the RBI has perplexed investors and this marks the end of pandemic led stimulus, we believe that investors would have to work very hard to earn good returns as the days of easy money are ending.

We suggest investors stay with quality names and invest in stocks that have a good growth outlook and are valued reasonably and take advantage of the current correction. 

Technically, 16000-15500 is an important demand zone where we can expect some buying interest. However, bulls will need to do heavy lifting to cross the 17000-17250 supply zone. 

Vineet Bagri, Managing Partner- TrustPlutus Wealth   

Indian markets are trading weak in line with its global peers. Investors are worried that aggressive rate hikes by central banks to check inflation could hurt global growth. RBI has surprised the market with an unscheduled rate hike - raising the repo rate by 0.4% and CRR by 0.5%. The market is fearful that the US Fed and other central banks would have to raise interest rates at a faster pace in comparison to what was planned, which could push large economies into a recession. 

The 10-year US government bond has risen from 0.5% in August 2020 to 3%+ now. In India, the 10-year government bond yield has increased from 6.8% in July 2020 to 7.4%+ now. This increase in risk free rate in turn impacts equity valuations on the negative.  

The markets could consolidate in the near term after this correction. All eyes are on the Q4FY22 results. A good strategy at this point is to identify quality businesses and invest in them in small lots over the next few weeks. 

Kunal Shah, Senior Technical & Derivative Analyst at LKP Securities. 

"The weakness in the Bank Nifty index continued with a gap-down opening. The index today formed a Doji candle which indicates indecisiveness at the current levels. The upside resistance stands at 35200 levels and downside support is visible at 34000 levels. A breach on either side will result in trending action 

V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services. 

"The single important factor roiling global equity markets is the reemergence of inflation as a major threat and market skepticism over the central banks' ability to contain inflation without triggering a sharp economic slowdown.  

Nasdaq is at a one-year low and S&P 500 appears to be moving in that direction. India cannot remain uncoupled from this trend particularly when FPIs are on a selling spree and has more fire power to remain bearish. 

Investors should remain calm in these turbulent times without taking aggressive positions. Calibrated buying on declines in small quantities in high quality stocks with preference for value over growth would be a good investment strategy.

Ajit Mishra, VP - Research, Religare Broking Ltd

Markets will react to Reliance numbers in early trade on Monday and then focus would shift to the global cues. The increasing fear of aggressive rate hikes from the US Fed has spooked investors across the globe including India. On the index front, the Nifty has tested the crucial support zone of 16,400 and indications are in the favour of prevailing decline to continue with some intermediate pause/rebound. In case of any rebound, the 16650-16800 zone would act as a hurdle. Participants should align their positions accordingly and use rebound to create shorts.

(Disclaimer: The views/suggestions/advice expressed here in this article are solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)