Trends on SGX Nifty indicate a cautious opening. Indian markets could open flat in line with flat to mildly lower Asian markets today and despite sharply lower US markets on Tuesday, said Deepak Jasani, Head-Retail Research, HDFC Securities.
Prashant Tapse, Vice President (Research) at Mehta Equities Ltd.. said, "Dalal Street looks set for another rough session on fears that the US Federal Reserve will have to accelerate further its tightening pace. So, commanding attention from here-on would be the two-day FOMC meeting beginning Jan. 25th. Also fueling pessimism are yesterday’s institutional activity where both, FIIs and DIIs camp sold shares in Indian stock markets. IT stocks earnings were generally strong so far but IT index fails to rally—fireworks missing. The Fed's hawkish talk is seen denting hopes of tech sector re-bound."
Mohit Nigam Head - PMS, Hem Securities said, "Benchmark Indices are expected to open flat as trends on SGX Nifty with a loss of 1 points indicate a cautious opening. Asia-Pacific markets were trading mostly lower while wall street's indexes fell sharply on Tuesday as tech shares continued seeing selling pressure as U.S. Treasury yields rose to milestones. Close to confirming a 10% correction for the first time since early 2021, the Nasdaq dropped most among major indexes.
On the technical front, the key resistance levels for Nifty50 are 18300 followed by 18450 and on the downside 18,000 followed by 17,700 can act as strong support. Key resistance and support levels for Bank Nifty are 38,500 and 37,900 respectively
Nifty closed lower on January 18 closing below the lows of the previous four sessions. Weak global cues resulted in this weakness even as traders opted to take profits after a dream uprun in mid and smallcaps. At close, Nifty was down 1.07 percent, or 195 points at 18,113. In the process, Nifty registered its worst fall in 2022.
Advance decline ratio has fallen sharply to below 1:3 suggesting broad based profit taking. The Nifty has formed a bearish engulfing pattern. Hence unless it crosses the high for Jan 18, i.e. 18351, we could see sell-on-rises scenario. A breach of 18,056-18,081 could lead to further weakness in the Nifty.
Stocks to watch out for
Markets may witness volatile session as Bajaj Auto, Larsen & Toubro Infotech, JSW Energy, Aptech, CCL Products (India), Ceat, JSW Ispat Special Products, Mastek, Nelco, Saregama India, Tata Communications, Tata Investment Corporation, Tejas Networks, Trident Texofab and some others will release quarterly earnings on January 19.
Foreign institutional investors (FIIs) net sold shares worth Rs 1,254.95 crore, while domestic institutional investors (DIIs) net offloaded shares worth Rs 220.20 crores. The negative takeaway is that both the institutions sold shares for second consecutive day. The street will be also bit apprehensive as scorching inflation is seen hurting retail sales. The Street also fears that Omicron variant has still not subsided.
Asian stocks decline in early trade
Most Asian stocks fell Wednesday following a Wall Street selloff in the wake of a surge in Treasury yields, as the prospect of Federal Reserve monetary tightening to fight high inflation weighs on markets.
US stocks close sharply lower
All three major US stock benchmarks closed sharply lower Tuesday, with losses led by the technology-laden Nasdaq Composite Index, as the high-growth tech sector fell under pressure from climbing Treasury yields and investors began digesting a busy week for company earnings.
The Nasdaq dropped most among major indexes on Tuesday and now has fallen about 9.7 percent from its November 19 record closing high, close to confirming a 10 percent correction for the first time since early 2021. The tech-heavy index also closed below its 200-day moving average, a key technical support level, for the first time since April 2020
Microsoft A blockbuster tech deal was also in the spotlight, after Microsoft Corp. said it had reached an agreement to acquire Activision Blizzard Inc. in an all-cash deal valued at $68.7 billion.
The yield on the 10-year Treasury note rose 9.5 basis points Tuesday to 1.866 percent, the highest in about two years. The yield on the 2-year Treasury note which is more sensitive to Fed policy expectations, shot up 7.3 basis points to 1.038 percent to reach the highest level since late February 2020. Crude-oil prices, meanwhile, traded at their highest level since 2014.
US economic data
In US economic data, the New York Fed’s Empire State index of business conditions nosedived to -0.7 in January from 31.9 in the prior month, reflecting fresh strains from the omicron virus and ongoing supply-chain bottlenecks.
A BofA survey showed that fund managers had cut their overweight positions in tech to their lowest levels since 2008, while another survey by Deutsche Bank found that a majority of respondents believed U.S. technology stocks are in bubble territory.
Oil prices at 7-year high
Oil prices on Tuesday climbed to their highest since 2014 as investors worried about global political tensions involving major producers such as the United Arab Emirates and Russia that could exacerbate the already tight supply outlook, Reuters said.
The risk added a premium to prices during the session. Brent crude futures rose $1.03, or 1.2 percent, to settle at $87.51 a barrel. U.S. West Texas Intermediate (WTI) crude futures ended $1.61, or 1.9 percent, higher at $85.43 a barrel.
Six stocks under F&O ban
Six stocks - BHEL, Escorts, Granules India, Indiabulls Housing Finance, Vodafone Idea, and SAIL - are under the F&O ban for January 19.