Markets

Markets get wary of heights after a 6-session streak, slip into the red

  • Indian stock markets came under pressure after a strong opening today amid reports on the Chinese military firing missiles into the Taiwan Strait.
  • RBI’s impending rate hike announcement and the weekly expiry of futures and options has also added an element of volatility in the markets.
  • A fall today could result in further decline as the markets are currently at their support levels, say analysts.

A combination of factors like the weekly expiry of futures and options, RBI’s ongoing Monetary Policy Meet and other global economic factors have resulted in the Indian stock markets experiencing volatility. After opening on a positive note earlier today, the benchmark Nifty50 index is currently in the red, with a 1% decline.

“The hint of tentativeness at higher levels should not be overlooked at all. On the technical front, 17450-17500 still holds the sturdy wall for the bulls, and a decisive closure above the same could only trigger fresh longs in the system. Meanwhile, any dip towards the 17200 zone is likely to get bought into,” said Sameet Chavan, Chief Analyst-Technical and Derivatives, Angel One.

Reports of China firing missiles into the Taiwan Strait are likely only the triggers behind the sudden fall in the markets. Nifty50 was trading at 17,200 as of 11:45 a.m., which is the current support level. A further decline could bring the Nifty back to the 17,000 level.

The energy and banking sectors came under pressure, with the state-owned SBI coming under selling pressure after 11 a.m.

Top gainers Performance Top losers Performance
Hindalco 2.58% NTPC -3.13%
JSW Steel 1.93% Tata Consumer Prods -2.80%
Cipla 1.56% SBI -2.51%
Nestle 1.56% Coal India -2.24%
Infosys 1.18% Reliance -2.12%

Source: NSE

Interest rate hikes priced in?

Following in the footsteps of the US Fed, RBI and Bank of England are expected to announce rate hikes as well. While the US Fed announced a 75 basis point hike, RBI and Bank of England are expected to announce a 50 bps hike.

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Indian stock markets came under pressure after a strong opening today amid reports on the Chinese military firing missiles into the Taiwan Strait. RBI’s impending rate hike announcement and the weekly expiry of futures and options has also added an element of volatility in the markets. A fall today could result in further decline as the markets are currently at their support levels, say analysts.

However, according to a note by IFA Global Research, this interest rate hike is already priced in, which makes sense given that there is a consensus about a 25-50 bps rate hike.

Christopher Wood says he’s “suspicious” of the rally in the US and India

Jefferies’ global head of equity strategy Christopher Wood said he’s suspicious of the rally in the US and Indian markets, saying that it is based on hopes of inflation peaking, not whether it has settled.

Further, Wood said Indian markets are currently mirroring the US ones, and with the RBI following in the footsteps of the US Fed when it comes to rate hikes, the stock market rallies also look similar.

The cool down in Brent crude oil prices from $110 per barrel at the end of July to $96.5 has also come as a relief to India, which depends on imports to meet 80-85% of its energy needs.

While this has provided relief to India, Wood says he sees oil prices going higher by the end of this year.

FIIs turn green, but this is just a start

After pulling out INR 2.9 lakh crore out of the Indian markets in the first seven months of 2022, foreign investors are showing signs of coming back.

According to data obtained from NSDL, foreign investors have plowed back INR 3,911 crore in the Indian markets in the first three days of trading in August.

While this is just 1% of the sell-off in 2022 so far, it’s a start.

Month Amount
January -₹41,346 crore
February -₹45,720 crore
March -₹43,281 crore
April -₹40,653 crore
May -₹54,292 crore
June -₹58,112 crore
July -₹6,568 crore
August ₹3,911 crore

Source: NSDL

Amongst other factors, an encouraging sign for foreign investors to come back to India is likely the better-than-expected earnings of India Inc. – more than two-thirds of Indian companies have either met or exceeded earnings expectations, according to a Motilal Oswal report.

However, two sectors remain of concern – automobile and commodities. A report by automobile dealers’ body FADA revealed that retail sales dropped 8% in July, on account of lower registrations of passenger vehicles and two-wheelers.

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