Dalal Street Corner: Weak global cues force market to extend losses for 2nd day ahead of CPI data; what should investors do on Tuesday?

The Indian market extended losses for the second consecutive days as benchmark indices ended lower by more than two and half per cent on Monday. Soaring US inflation data, expectations of aggressive interest rate hike by Federal Reserve, relentless Foreign Institutional Investors selling and weakness in rupee contributed to the Monday's crash.  

The broader Nifty50 declined 2.6% to close below 15,800 and the 30-share Sensex corrected more than 1450 points to settle near 52,846.70. Nifty midcap and small cap indices ended lower by 2.8% and 3% respectively amid profit booking ahead of FOMC meet.  

On the sectoral front, Nifty IT cracked over 4%, which was followed by Nifty Metal that closed with 3.85%. Besides all other indices slipped deep in the red with banking taking the maximum beatings. 

Here is what what experts make of today's trading session and suggest what should investors do in the current market scenario

S Ranganathan, Head of Research at LKP securities   

Weak Global Cues ahead of the Fed meet painted benchmark indices here in a sea of red as street awaits CPI data today on a day when the rupee hit a new low. The risk off mode in equities globally after the US inflation print raised fears of an aggressive rate hike and the Dollar Index at 104 seem to weigh heavily amidst relentless FII selling despite local redemptions in May coming in at a two-year low 

Vinod Nair, Head of Research at Geojit Financial Services. 

The correction in the global markets is due to a double whammy of upcoming policy rate hikes and cuts to the central bank’s balance sheet.  Higher-than-expected US inflation data added fuel to the already wrecked market which was factoring in a 50bps hike in the Fed rate.  

The weakened rupee, persistent FII selling along with the anticipation of elevated domestic CPI numbers gripped domestic markets in fear. 

Pankaj Pandey, Head – Research, ICICIdirect   

The global as well as Indian equities has witnessed a sharp correction recently amid the worries over US inflation and possible aggressive Fed policy tightening while Covid-19 warning from Beijing has also added to concerns about global growth.  

Investors also await consumer inflation data in India. On the equity market outlook, while we believe volatility may remain in the near term, the recent trough gives an opportunity to the long-term investors to load up on quality companies with sustainable growth visibility.  

On the medium term, we continue to remain constructive on domestic consumption, capital goods and allied space and domestic manufacturing plays.    

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

The Nifty had broken its short-term support in the last week. On June 10, it had breached the 20 DMA on a closing basis. This indicated range shift on the downside. Consequently, the Nifty nosedived towards the swing lows seen in March & May this year.  

It is crucial to monitor how structure develops near this important zone. As long as the index stays above the March low of 15671 on a daily closing basis, there is scope for some recovery. On the flip side, failure to hold that low on a closing basis would push the index down to 15400 & subsequently to 15100 levels 

Santosh Meena, Head of Research, Swastika Investmart Ltd   

The record-high inflation numbers announced in the USA on Friday have created a huge sell-off in the global equity markets. The markets expect Fed to become more aggressive to tame the entrenched inflation; this will lead to huge outflows of FII’s and FPI’s money and further depreciation of INR.  

To be honest, today’s fall is nothing new; it’s just a reality check as the majority of stock prices had moved far away from their fundamentals or intrinsic values. Markets often need trigger events to comply with the universal law of mean reversion and the Russia-Ukraine War is that event this time.   

Markets often get confused between risk and uncertainty, risk is the permanent loss of capital whereas uncertainty means situations involving imperfect or unknown information. Uncertainty often leads to correction and once it subsides, the markets normalize.  

In short, we recommend investors to see the big picture, it is true that inflation is going to stay for a while and affect the profits of corporate India, but in the medium to long term, there are many companies with good fundamentals, robust financials, and competitive advantages that are going to perform well.  

Further, India is better placed than its peers with respect to growth factors and the ability to fight the current inflation.  

Thus, the current uncertain times are best to lap up such quality stocks and investors can use the buy on dips strategy, however, in the near term, the markets are going to be volatile. 

(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.)