In a week of high volatility, bulls made a comeback to D-street on Friday, May 20, 2022, thanks to sharp buys that ended the benchmark index’s five-week losing streak. At Friday’s close, Nifty was up 456.7 points or 2.89 percent at 16,266 levels. Volumes on the NSE were slightly below the recent average. Real estate, metals, capital goods and healthcare indices have gained the most of the sectors. Advance decline rate is also sharply positive.
Speaking to the Indian stock market, Sonam Srivastava, founder of Wright Research, said: “There was a surprising uptick this week, but hardly anyone is convinced that this upswing will last, given the doomsday scenario of inflation watchers and central bankers. Autos and FMCG have led the pack. led this week and Metals has also shown a steep recovery, nevertheless the emergence of defensive assets and commodities is a classic bear market move, as a result the coming weeks will be weeks of caution and risk mitigation.”
Vinod Nair, head of research at Geojit Financial Services, said: “This week the domestic market moved along with its global competitors as concerns about the global economic slowdown and interest rate hikes took control of market sentiment.”
“FIIs continued to sell as they hunted for high yield US bonds, adding volatility to the Indian market,” he added. “As investors are now investing cautiously, value stocks should do well during this consolidation period, supported by subdued valuation.”
May series F&O expires
The May series derivatives will expire on Thursday, May 26, leading to increased market volatility as investors face the expiration with more uncertainty than last month. If traders rush to square or roll over their positions, the market can react accordingly.
Inflation and crude oil prices
Inflation figures continue to shock markets around the world. The wholesale price index (WPI) reading jumped to new highs in April of 15.1 percent, registering an outright double-digit 13th month, thanks to rising prices of metals, crude oil, food items and more.
Over the weekend, however, the government offered some relief to consumers by cutting petrol and diesel prices. In addition, the government also cut excise and customs duties on several products to lower prices.
US Fed Meeting
The officials of the central bank of the United States of America will meet next Wednesday. Although they have already announced a 50 bps rate cut, more clarity is expected to come after the meeting.
The United States economy shrank 1.4 percent year-on-year in the first three months of the year, according to the first reading of US GDP in the first quarter. The world’s largest economy will publish its second reading on Thursday, which is not expected to bring material change.
Worries about buzzing stagflation and a potential recession could hurt the company. On the other hand, a few pundits and economists still expect the US economy to grow this year, dismissing Q1 as a blip.
In recent months, foreign institutional investors have started selling Indian equities, which has kept markets under constant pressure. The foreign investors have taken more than Rs 36,000 crore from the Indian stock markets. The trend is likely to continue this month as well.
Helpful Technical Perspectives
Santosh Meena, Head of Research, Swastika Investmart Ltd., “Technically, the Nifty respects the key support level of 15700 and trades volatile between 15700-16400. If Nifty manages to stay above the 16400 level, we can expect a short covering rally towards 16700/16900 levels, while if Nifty falls below 15700, the selling pressure could expand to 15500/15000 levels.”
Meena said: “Banknifty also respects psychological support of 33,000, while 34,800 acts as a major hurdle. If Banknifty manages to hit the 34800 level, we can expect a short covering rally to the 35500 level, but if it drops below the 33000 level, it could move towards the 32000 level.
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