Dalal Street Corner: Nifty, Sensex pare losses; end marginally lower ahead of Id-Ul-Fitr holiday; What should investors do on Wednesday?

In the holiday-shortened week, the Indian market ended with marginal cuts as it pared losses made in the early trade to end flat with negative bias on Monday. The domestic equity markets will see no trading on NSE, BSE on Tuesday (May 3, 2022) on account of Id-Ul-Fitr (Ramzan Id). Similarly, the Multi Commodity Exchange of India (MCX) will remain closed during in the first half between 9 am and 5 pm. The trading will resume on MCX after 5 pm and will close at 11:30/11:55 PM. 

Meanwhile, banking and metal stocks led the recovery in the closing hours and Nifty50 closed near 17,100, while the Sensex marginally declined by 85 points on Monday. Consumer Durable, IT and Auto stocks came under heavy selling pressure as they forced benchmarks to extend losses for the second day in a row.  

In the broader market, Nifty mid cap declined nearly 0.6% and small cap fell by 1.3%.  

As per experts, going ahead, Investor focus will turn to the Fed meeting, which is widely expected to raise interest rates by 50 basis points on Wednesday. Market participants would also watch for signals about the future path for interest rates, the Fed`s plans for reducing its balance sheet and its view on when inflationary pressures will recede. 

Vinod Nair, Head of Research at Geojit Financial Services, said the recent hawkish turn by Fed has made investors extra cautious ahead of the upcoming Fed meeting triggering high volatility in the market.  

"The rising dollar index, FII selling spree and elevated commodity prices further hammered the risk sentiment. On the other hand, domestic numbers like GST collection, auto sales numbers and Manufacturing PMI for the month of April gave a sense of an improving economic outlook," he added.  

Markets opened gap down on the back of weak global cues ahead of the FOMC meet but managed to recoup most of the losses as factory output for April improved sequentially amidst input cost inflation, said S Ranganathan, Head of Research at LKP securities. 

"The banks led the recovery on expectations of higher credit growth this fiscal and the broader markets despite being a bit sluggish ahead of a trading holiday tomorrow witnessed accumulation in select pockets like standalone refineries and hospitality," he said.  

Meanwhile, after turning net buyer briefly on Thursday, Foreign institutional investors (FIIs) offloaded shares worth Rs 3,648.30 crore on Friday, showed stock exchange data. 

According to Ajit Mishra, VP - Research, Religare Broking, "Markets managed to rebound amid the weak global setup which shows that bulls are not in the mood to surrender easily. However, the real test would be to handle the volatility post the US Fed meeting."

Meanwhile, the domestic factors like earnings and macroeconomic data would further add to the choppiness, Mishra also said. "It’s prudent to limit positions and continue with a stock-specific trading approach."