The Nifty-50 is down by 1 percent this week as markets are worried about risks from rising inflation globally and extension of Covid-19 restrictions in various states locally. After seeing unprecedented up move since the start of the year the BSE Metal Index fell by 4 percent this week. said Rusmik Oza, Executive Vice President, Head of Fundamental Research at Kotak Securities, said, amongst sectors the BSE Capital Goods Index is by 4 percent followed by BSE utilities which is up by 2.7 percent. PSU stocks were major gainers this week led by names like Coal India, IOC, Power Grid and NTPC. The BSE PSU Index was up 3 percent this week. The staggered state level restrictions rather than a nationwide lockdown is limiting the impact relative to last year. The stable 10 Year G-Sec Yield and Indian currency is also helping Indian markets sustain even though we are seeing the highest spread of the pandemic.
Due to the steep rise in both soft and hard commodity prices the threat of higher inflation looms over all global economies. The annual CPI inflation in the US surged to 4.2 percent, the most since 2008. Tech stocks have taken a beating this week with the Nasdaq Composite Index down 4.6 percent in the first four days of this week. Asian markets too have corrected sharply this week after the crash in Taiwan where the Taiex Index corrected by 8.4 percent this week, said Oza, said.
Fresh concerns of COVID and unwinding of leverage trades led to the sharp fall in Taiwan’s market. Singapore and Japan markets are down by 4.6 percent and 4.3 percent, respectively this week as they are also seeing resurgence in COVID cases, he said, adding, overall, the MSCI Emerging Markets Index has lost ~4 percent this week. The global correction and potential impact of commodity prices on this quarter’s earnings can lead to some kind of correction in Indian markets in the very near future.
For the third consecutive day, Nifty ended in negative territory as after a slightly positive opening. The benchmark index dragged for the day and closed on a negative note at 14,681 with a loss of almost 15 points whereas Bank Nifty ended at 32169.55 levels with a loss of 282 points led by Nifty Metal, BSE Smallcap, Midcap which saw profit booking during the day. Nifty Banking, Oil and gas and Nifty Auto were under pressure too whereas capital good, FMCG were the top leaders which capped the Nifty losses for the day. On the stock front, AsianPaints, UPL, ITC, LT were the gainers while Coal India, Hindalco, Tata Motors, Tata Steel were the major losers.
Sumeet Bagadia, Executive Director, Choice Broking said, technically, the Nifty index has closed below 50-Days SMA and a falling trendline, which suggests a downside move for the near-term. Moreover, an oscillator Stochastic also showed negative crossover on the daily charts, supporting the bearish move for the upcoming sessions. At present, the Index has an immediate support at 14,600 levels while on the upside, 149,00 acts as a crucial resistance zone.
Shrikant Chouhan, Executive Vice President, Equity Technical Research at Kotak Securities, said the last week has been volatile for the traders and this week started on a positive note but due to extremely uncertain global cues index shed over 370/1100 points or nearly 1 percent.
"We are of the view that, the broader texture of the market is still in to the bullish but due to weak global market conditions market may consolidate in the range of 14,500 -14,800/48,200 - 49,200 in the near future 14,590/48,470 should act as a strong support level for traders below the same correction wave likely to continue up to 14,500/48,200. Further, down side may also continue which could drag in the index up to 14,390/47,800. On the flip side, 14,800/49,200 should be the sacrosanct level for the bulls above the same uptrend wave likely to continue up to 14,950-15,100/49,750-50,100," Chouhan added.