In a week of high volatility, bulls made a comeback on the D-street on Friday, May 20, 2022, thanks to sharp buying, which ended the five-week losing streak of the benchmark indices. At Friday’s close, Nifty was up 456.7 points or 2.89 per cent at 16,266 levels. Volumes on the NSE were a little below recent averages. Among sectors realty, metals, capital goods, and healthcare indices have gained the most. Advance decline ratio is sharply positive as well.
Speaking on the Indian stock market, Sonam Srivastava, Founder at Wright Research said, “This week saw a surprising rebound, but hardly anyone is convinced that this rebound would stick, given the doom and gloom narrative from inflation watchers and central bankers. Autos and FMCG have led the pack this week, and Metals have also shown a steep recovery; nevertheless, the rise of defensives and commodities is a classic bear market move. As a result, the next few weeks will be weeks of caution and risk management.”
Vinod Nair, head of research at Geojit Financial Services, said that “This week the domestic market was moving in tandem with its global peers. The worries over global economic slowdown and rate hikes took control of the market sentiments.”
“FIIs continued their selling spree as they chased high yield US bonds adding volatility to the Indian market,” he added. “As the investors are now investing with caution, value stocks should do well during this consolidation period, supported by moderate valuation.”
May Series F&O Expiry
The May series derivatives will expire on Thursday, May 26, which will lead to heightened volatility in the market as investors head towards the expiry more uncertain than the previous month. As traders rush to either square or rollover their positions, the market may react to them accordingly.
Inflation and Crude Oil Prices
The inflation numbers continue to spook the markets across the globe. Wholesale price index (WPI) reading jumped to new highs in April 15.1 per cent, registering a straight 13th month high of double-digit gains, thanks to rising prices of metal, crude, food articles, and more.
However, over the weekend, the government provided some relief to the consumers by slashing petrol and diesel prices. Furthermore, the government also cut excise and customs duty on various products to bring the prices down.
US Fed Meeting
The officials of the central bank of the United States of America are going to meet on Wednesday next week. Though they have already made an announcement that there will be 50 bps cut in interest rate, more clarity would come after the meeting.
US GDP
The United States’ economy shrank 1.4 per cent on an annualised basis in the first three months of the year, according to the first reading of US Q1 GDP. The world’s largest economy will release the second reading on Thursday, which is not expected to deliver any material change.
The concerns over buzzing stagflation and a possible recession may hurt the company. On the other hand, a few experts and economists still expect the US economy to grow this year, dismissing Q1 as a blip.
FII Selling
Over the past few months, foreign institutional investors have embarked on their selling spree in Indian equities, which has kept the markets under constant pressure. The foreign investors have pulled more than Rs 36,000 crore from the Indian equity markets. The trend is likely to continue this month as well.
Nifty Technical Outlook
Santosh Meena, Head of Research, Swastika Investmart Ltd., “Technically, the Nifty is respecting the key support level of 15700 and trading volatile in the range of 15700-16400. If Nifty manages to sustain above 16400 level then we can expect a short-covering rally towards 16700/16900 levels while if Nifty slips below 15700 then selling pressure may get extension towards 15500/15000 levels.”
Bank Nifty
Meena said, “Banknifty is also respecting psychological support of 33000 while 34800 is acting as a key hurdle. If Banknifty manages to take out 34800 level then we can expect a short-covering rally towards 35500 level however if it slips below 33000 level then it may head towards 32000 level.”
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