The benchmark stock indices closed on the last working day this week with 2 percent gains shrugging off US Fed interest hikes. Bank Nifty soared 1.9 percent on closing. All the sectoral indices ended in the green. BSE midcap and smallcap indices gained over a percent each.
Sensex was up 1,047.28 points or 1.84 percent at 57,863.93. The Nifty was up 311.70 points or 1.84 percent at 17,287.00. About 2,046 shares have advanced, 1270 shares declined, and 121 shares are unchanged.
Among major Nifty gainers were HDFC, JSW Steel, Titan Company, SBI Life Insurance and Kotak Mahindra Bank. Infosys, Cipla, IOC, Coal India and HCL Technologies were among the laggards.
The US Fed increased rates by 25 bps and signaled another six rate hikes of 25bps each for the year. This announcement was on expected lines for the market, and thus the US and Indian markets rallied in relief, said Nishit Master, Portfolio Manager, Axis Securities.
It is crucial to keep an eye on the proposed reduction in the Balance sheet by the US Fed (QT), which is expected to start from the next meeting. This tightening of liquidity can add volatility to the markets and lower PE multiples. Despite the recent rally, the markets will continue to remain volatile in the near future on the back of tightening of liquidity conditions globally. One should use this volatility to increase equity allocation for the long term, said Master.
The stock markets rallied across global indices and that gave a major fillip to local gauges, said Amol Athawale, Deputy Vice President - Technical Research, Kotak Securities Ltd. Major negative factors behind the recent crash are slowly on the wane, which is helping the markets to rejuvenate. On the technical front, the support for Nifty has now shifted to 17,000 from 16,800 and as long as the index is holding 17k level the uptrend wave will continue till 17450 and could lift the index up to 17,600. However, 17,000 could be the sacrosanct support level for the Nifty and close below the same could see Nifty hitting 16,900-16,800 levels.
The markets have been dominated by risk off sentiment in last few weeks due to concerns on high commodity prices owing to Russia-Ukraine crisis and monetary tightening by Federal Reserve, said Hemant Kanawala, Head – Equity, Kotak Mahindra Life Insurance Co. Ltd. On the other hand, initiation of peace talks between Russia and Ukraine, lock down in China due to rising covid cases and continued buying of Russian oil by India and China have provided some relief to commodity prices. While, these incrementally positive developments on geopolitics have led to easing of pressure on commodities front, the situation continues to evolve and a resolution is still away. Hemant Kanawala, Head – Equity, Kotak Mahindra Life Insurance Co. Ltd. said, "Consequently, we expect markets to remain in consolidation phase in near term as investors assess the global developments and upcoming domestic earnings season on durability of economic recovery.”
Nifty enjoys another session in green
Nifty bulls celebrated Holi with green while short sellers got squeezed. The auspicious occasion of Holi was celebrated at Dalal Street as the benchmark Nifty enjoyed yet another session of strong gains and most importantly, was seen racing to hit the magical 17500 mark, said Prashanth Tapse, Vice President (Research), Mehta Equities Ltd. The technical landscape has turned aggressively bullish. This optimistic backdrop should take Nifty easily to its magical goalpost at 17,500 mark and then aggressive targets at 18,000 mark.
Fed's forecasts for this year aggresive
While the Fed's forecasts for six more rises this year remain aggressive, economists believe the markets are rallying because they were oversold, and short covering has driven indices higher. Even European stocks rose today reflecting overnight advances on Wall Street following a widely anticipated interest rate hike in the United States, while lingering hope over Russia-Ukraine peace talks boosted confidence even more.
Mohit Nigam, Head - PMS, Hem Securities, said, on the technical front key resistance levels for Nifty50 is 17,500 and on the downside 17,000 will act as strong support. For Bank Nifty, key resistance level is 36,800 and on the downside 35,800 will act as strong support.
Sachin Gupta AVP, Research, Choice Broking, said, Technically, the nifty index has formed bullish candle on the daily chart and sustained above 100-days SMA that indicates bullish strength for the near term. All the key indicators like RSI, Stochastic & MACD have supported the upward rally in the index. At present, the index has support at 17,100 levels while resistance comes at 17,470 levels. On the other hand, Bank nifty has support at 35,700 levels while resistance at 37,000 levels.
Markets rally this week
Markets were strong this week with softening crude prices, China economic stance, favourable RBI policy hopes and return of foreign investors as buyers of Indian equities. Markets also regained as tensions between Russia-Ukraine began to de-escalate, said Shrikant Chouhan, Head of Equity Research (Retail), Kotak Securities Ltd. While worst may seem to be over in terms geo-political tensions, a prolonged rise in inflation could be lurking around the corner as multiple sanctions placed on Russia have sparked an unbridled rally in commodity prices.
The S&P 500 closed up more than 2 percent while the Nasdaq rallied almost 4 percent on Wednesday as investors shrugged off initial jitters following the US Federal Reserve's interest rate increase and its signal that more hikes would be needed to fight inflation, ending the pandemic-era's easy monetary policy.
Indian stock markets also rallied during the week. The Sensex was at 57,969 on March 17, 2022 gaining 4.52 percent during the week, while the Nifty was at 17,319 on gaining 4.36% during the week. Midcap and Smallcap Index underperformed during the week gaining 2.68 percent and 3.05 percent respectively. All sectoral Indices ended in green during the week.
BSE Auto and BSE Realty were top gainers gaining around 5 percent each. While BSE Power and BSE Metal were the lowest gainers gaining less than 1 percent. Bank Nifty gained around 5.75 percent. Rest of sectoral Indices gained between 1 to 3 percent.
US Fed hikes interest rate for first time in 3 years
US Treasury yields ebbed on Thursday morning, as investors digested the Federal Reserve’s decision to hike interest rates for the first time in more than three years. The Fed approved on Wednesday a benchmark interest rate increase of a quarter of a percentage point, its first hike since 2018. The policymaking Federal Open Market Committee (FOMC) also pencilled in six more hikes in 2022, as well as factored in a reduction in its $9 trillion balance sheet.
Fed Chairman Jerome Powell at his post-meeting news conference hinted that the balance sheet reduction could start in May. FOMC members also increased their inflation expectations, forecasting that the personal consumption expenditures price index excluding food and energy will see 4.1percent growth this year, compared with the 2.7 percent projection in December 2021.
New confirmed COVID cases in China
In other international news, Mainland China reported for Wednesday a second-straight day of declines in new confirmed COVID-19 cases. The omicron wave in China is more similar to the power shortage episode from late last year. The supply chain shocks are relatively light so far, but the primary economic impact is on consumer spending and the services industry.
