Dalal Street Corner: Nifty, Sensex closed highly volatile week nearly 2% lower; what should investors do on Monday?

Bears returned to Dalal Street on Friday as domestic equity markets saw benchmarks edging lower by more than 1% on the last trading day of the week. The Nifty50 and the Sensex closed 1.7% and 2% respectively for the week ended April 22, 2022.  

On Friday, the 50-share Nifty50 ended below 17, 200, while the Sensex tanked more than 700 points amid weak global cues. Besides, Foreign institutional investors continued their selling spree, offloading shares worth Rs 713.69 crore on Thursday, according to stock exchange data. Heavy selling pressure seen index majors Infosys, ICICI Bank, HDFC Bank and Reliance Industries.  

"The recent trend of the market was due to the release of high inflation data, the uncertainty surrounding Russia -Ukraine peace talks, volatile crude prices and weak quarter results," said Vinod Nair, Head of Research at Geojit Financial Services. 

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Meanwhile, Nifty midcap and small cap ended lower by 0.9% and 0.3% respectively.   

Sector-wise, all sectors on the NSE turned red on Friday with maximum pressure seen on banking, financial, metal, pharma and healthcare stocks.   

In the week ended April 22, the benchmark indices closed in the green on two occasions and declined thrice. As the market continues to trade volatile, experts decode the trends in the market and guide investors about how it is likely to behave going forward.  

V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services 

This excessively volatile market without any clear direction is being influenced on a daily basis by two factors. The external factor is the erratic movement in the mother market, the US, where the S&P 500 and Nasdaq go up by around 2 per cent one day and down by around 2 per cent the next day.  

The internal factor influencing the market is the see-saw tussle between FIIs and DIIs. Both these external and internal factors are erratic now and that's why the market is volatile without any direction. The Fed chief's comment that a 50bps rate hike is possible in May and that 'control of inflation has become absolutely essential' has pushed the 10-year bond yield above 2.9 per cent and consequently impacted equity markets. But this impact, too, is likely to be temporary since the market has already discounted this known hawkishness of the Fed. 

Vinod Nair, Head of Research at Geojit Financial Services.

"Global markets have moved cautiously in context to inflation data release, uncertainties of war development, volatile crude prices, hawkish FED policy and mixed quarter results. Similarly, domestic market has been volatile with hawkish RBI policy and negative start to Q4 result season by IT and mixed results by the banking sector. This has led to heavy selling in heavyweights by FIIs. Weak IT results has prompted the market to be worried about the headwinds like attrition, wage inflation, lower utilization, and possible cut in IT spending by industries due to geopolitical and macro issue. The degree of downfall is high because the sector is trading at high valuation and risk of downgrade is increasing, affecting the short & medium-term performance.

Though the Fed chief’s comment on a 50 bps rate hike in May made investors cautious, the inflation is not expected to remain elevated in the long term and a change from hyperinflation to normal is likely in the short to medium term in anticipation of improvement in supply. However, FIIs selling and elevated level of Indian broad market considering the recent bounce are the short-term apprehensions"

Santosh Meena, Head of Research, Swastika Investmart Ltd. on market 

The market is very volatile for the last 7 months and witnessing large swings on both sides amid lots of headwinds like geopolitical tension, high commodity prices, record inflation, rising US bond yields and relentless selling by foreign investors but the good part of this market is that it is not breaking down because the outlook of the Indian economy is still promising and the market is continuously getting support of domestic money. The long-term outlook is bullish for the market with short term volatility therefore long-term investors should remain invested while short-term investors can maintain stop loss of 16500. Investors should focus on Indian economy facing sectors like capital goods, infrastructure, real estate, financials, consumer durable etc. 

Gaurav Ratnaparkhi, Head of Technical Research, Sharekhan by BNP Paribas

The Nifty had formed a Doji pattern on the weekly chart for the first week of April. The pattern was formed near the weekly upper Bollinger Band as well as near a falling trendline drawn from the Oct high. Thereon the index stepped into a short term correction mode & breached short term supports on the downside.

On the way down, the index created a gap area on the daily chart & with the recent minor degree bounce it attempted to fill up that gap area. However the index faced fresh round of selling near the upper end of the gap area that pushed the index down again on April 22. Overall structure shows that the index is set to test the swing low of 16824 & below that can target 16600 in the short term. On the higher side, 17400-17500 will act as a cap for the short term

Milind Muchhala, Executive Director, Julius Baer 

The Indian equity markets have been gyrating in the past few days after a healthy pullback witnessed since the geopolitical crisis-led lows seen in the early part of March. While the headline indices seem to be in a consolidation mode, the larger activity seems to have shifted to the broader markets, with a large number of small caps and midcaps seeing greater market participation, especially in select sectors such as Sugar, Fertilisers, Textiles, Paper, etc.  

The markets seem to be slightly cautiously positioned, as the Q4FY22 earnings season has begun on a mixed note with small disappointments from a couple of large sectoral majors. Hence, investors might prefer to wait out for more results to be announced and hear out the accompanying commentaries to gauge in case there are any concerns of earnings cuts creeping in.  Also, the impending concerns of elevated commodity prices due to geopolitical situation and supply chain challenges, and with increasing expectations of a harsher hike by the US Fed, the market may continue to witness higher volatility in the near term.  

A prolonged geopolitical situation and elevated prices can gradually start weighing on demand, profitability and growth estimates. Lastly, the government seems to be getting ready to launch the mega IPO of LIC, which may also put some near-term pressure for the secondary markets due to the large supply of fresh paper.  

We have been slightly cautious on the markets since the past few weeks and suggest creating some liquidity in the recent pullback, as the uncertainty and volatility is likely to continue for some more time with too many moving parts, providing intermittent opportunities. 

Ajit Mishra, VP - Research, Religare Broking Ltd 

Markets reversed yesterday’s gain and shed nearly one and a half percent following weak global cues. The hawkish statement from the US Fed dented sentiment globally including in our markets. The benchmark, after the gap down start, tried to recoup some of its losses in the middle but selling pressure in the latter half pushed the index to the day’s low. Finally, the Nifty index closed at 17,171; down by 1.3%. In line with the trend, mostly sectoral indices ended in the red wherein metal, banking and healthcare were the top losers.  

Markets will react to the ICICI Bank numbers in early trade on Monday. Besides, global cues like updates on the Russia-Ukraine crisis, and China’s COVID situation will also remain on the participants’ radar. The slide in the Nifty index has faded hopes for a directional move and we may see further consolidation ahead. Amid all, participants should maintain focus more on stock selection and overnight risk management. 

(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)