The domestic equity markets corrected nearly 2 per cent in the eary trade on Thursday as the benchmarks Nifty and the Sensex touched day's low of 16,927.85 and 56,674.51 respectively. Barring a few, almost all sectoral and broader market indices turned negative as the market resumed trading after remaining closed on Wednesday on 26th January.  

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"Globally markets are very volatile amid hawkish US Fed and rising geopolitical tension and Indian markets are also facing the same pressure due to heavy FIIs' selling. If we look at the Indian markets then there are lots of positive triggers that may help our market to outperform but we just need some calmness in global markets," said Parth Nyati, Founder, Tradingo. 

Talking of technical factors for markets on Thursday, Mohit Nigam, Head - PMS, Hem Securities, said, "Key resistance levels for Nifty50 are 17,500 followed by 17,800 and on the downside 17,000 followed by 16,600 can act as strong support. Key resistance and support levels for Bank Nifty are 38,000 and 37,100 respectively." 

Meanwhile, there were several factors that forced benchmarks to test crucial levels on Thursday.  Here are the key reasons that triggered the downfall in the markets.  
 

Fed meeting Update:  

In its latest policy update, the Fed signaled it is likely to raise U.S. interest rates in March and reaffirmed plans to end its bond purchases that month before launching a significant reduction in its asset holdings, reported Reuters. In the follow-up press conference, Powell warned that inflation remains above the Fed`s long-run goal and supply chain issues may be more persistent than previously thought. Stocks turned negative during his comments, as some investors bet the Fed would prioritize fighting inflation over ensuring robust economic growth. 

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"The market is already pricing in a 100 bps hike in policy rates by US Fed. Hence, the impact would depend on the aggressiveness of the hiking cycle. In case FED were to front-load the hikes, one can expect USD strength with equity sell-off and flattening of the yield curve," said Ashhish Vaidya, Head of Treasury, DBS Bank India.  

FIIs relentless selling 

Foreign Institutional Investors (FIIs) continued its selling streak as the FIIs sold to the tune of Rs 7,094.4 crore in the Asian markets on January 25. This month, FIIs remained net seller to the tune of Rs 26,409.78 crore so far in domestic equity markets.   

Oil prices 

Oil prices fell on Thursday as investors cashed in profits from the 2% gains in the previous session after the U.S. Federal Reserve indicated an interest rate hike in March, leading to a technical correction in surging energy markets, said Reuters. Crude prices have surged amid the tensions between Ukraine and Russia, the world`s second-largest oil producer, that has fanned fears of disruptions of natural gas to Europe. 

"NYMEX crude trades marginally lower near $86.8/bbl after a 2% gain yesterday, when it hit fresh 2014 high. Crude eased as US dollar strengthened and equities weakened on prospect of faster rate hikes by Fed. Crude oil has been setting new highs which indicates strong upward momentum, however, if risk sentiment weakens significantly, we may see some correction," said Ravindra Rao, CMT, EPAT, VP- Head Commodity Research at Kotak Securities:- 

Pre-Budget trading:  

The markets usually trade volatile around the Budget. Union Finance Minister Nirmala Sitharaman will present Budget on February 1, 2022. "Stock markets are always volatile either before Budget or after Budget. If you observe the data for the last 10 years, seven years markets had fallen before the Budget and thrice after the budget, Hence, it is not a great worry for the broader market," said Amit Jain, CEO & CO-Founder, Ashika Wealth Advisors.

Parth Nyati said we might see a post budget rally in the market as it not going in the budget with any euphoria. Last three years' trend shows that the Market corrects ahead of budget then it witnesses post-budget rally, he observed.