PremiumSensex is currently slightly shy of the 61,000 mark, while Nifty 50 has cruised over 18,100 levels. Despite feeble global cues, domestic equities witnessed a volatile trend with both bears and bulls being active in the week from October 31 to November 4th, however, closed on a positive note. In the upcoming trading sessions, markets are expected to continue on a volatile tone on the back of crumbling hopes for softening in interest rates by major central banks anytime soon, global recession fears, and anticipation of muted Q2 results from Tier 2 and Tier 3 companies. However, if the Nifty 50 managed to breach the 18,200 mark, then a strong rally up to 18,400 is most likely.
Last week, both Sensex and Nifty 50 rose by nearly 2% each. The rupee traded range-bound against the US dollar, while foreign funds extended their buying spree in the equities on the other hand domestic investors emerged as net sellers.
On November 4th, the Sensex closed at 60,950.36 up by 113.95 points or 0.19%. Nifty 50 ended at 18,117.15 higher by 64.45 points or 0.36%. The benchmarks had snapped 2 trading session selloffs to close in the green on Friday. Smallcap stocks outperformed in the broader basket. In terms of sectoral indices, metal stocks witnessed a strong rally offsetting selling pressure in healthcare and IT stocks. Also, capital goods and oil & gas supported the upside on the last trading day of last week.
Kunal Shah, Senior Technical & Derivative Analyst at LKP Securities said, "The Indian indices throughout the week witnessed a volatile trading session where both the bulls and the bears were active with full force. The indices witness flat closing on a weekly perspective with sector and stock-specific moves. Major buying action was seen in sectors such as infra, metals and railway stock, and PSU bank. The Nifty metal index was the top-performing sector with 7.5% gains followed by the PSU BANK index which was up by 2.9%"
Meanwhile, at the interbank forex market, the rupee strengthened on Friday to close at 82.44 against the US dollar. The Indian rupee has depreciated by more than 10% against the US dollar so far this year due to the hawkish stance of the US Fed which pushed the greenback to over 2-decades high, coupled with the weakening of the Chinese yuan, geopolitical tensions, and soaring crude oil prices.
Whereas FPIs infused ₹15,280 crore in the equities market from November 1st to 4th, while they were net sellers in other instruments. In October, FPIs were net sellers with an outflow of ₹8 crore in the equities -- which is the lowest monthly selloff of the current year. Furthermore, FIIs inflow stood at ₹6,160.11 crore from November 1-4 in the equity market, however, DIIs have pulled out ₹3,388.96 crore from equities so far in November month.
According to Vinod Nair, Head of Research at Geojit Financial Services said, global markets were buoyed at the onset of the week as markets across the globe were expecting central banks to dial down big interest rate hikes. Contrary to expectations, the Fed and BoE refused to tone down the rate hike narrative, shattering the global markets. Powell cautions that the desired Fed rate level is higher than previously expected, even though he indicated a rate hike of less than 75 bps in the upcoming meetings. The Bank of England concurred with the Fed’s view and added that a protracted recession is anticipated. The hawkish commentary drove the dollar to soar along with US Treasury yields.
However, Nair also pointed out that FIIs' ongoing interest in the market and strong earnings kept the domestic market losses in check. Domestic PMI numbers also worked in favour of Indian equities as manufacturing and service activity remained healthy in October.
Nair added that "with mounting concerns about a global recession and the anticipation of muted Q2 results from Tier 2 and 3 companies, markets are likely to be volatile in the upcoming week."
Furthermore, Apurva Sheth, Head of Market Perspectives, Samco Securities said, "Nifty continues to trade in green and manages to close above 18100 levels on the weekly time frame with a gain of 1.86 percent. On the daily chart and has maintained its cycle of higher highs – higher lows, construing to have a bullish setup."
On a technical aspect, Sheth said, "the index is firmly placed above all the major exponential moving averages. We have seen some tentativeness at higher levels, but we do not construe this as any sign of worry. Traders are just opting to take some money off the table after seeing a decent up move in the previous couple of weeks."
As far as levels are concerned on Nifty 50, in Sheth's view, a 17750-17700 is likely to cushion any fall on an immediate basis; whereas on the flip side, a decisive breach over the immediate resistance of 18200 could trigger a strong rally towards 18400 and beyond.
Moreover, Mitul Shah - Head of Research at Reliance Securities said, “Federal Reserve raised policy rate by 75bps for a fourth straight time. The 2QFY23 earning season so far witnessed healthy revenue growth but higher inflationary pressure took toll on profitability. Inflation continues to remain high, both in the domestic and the US economy. Any disappointment in earnings or weak management commentary on demand may lead to correction given sharp outperformance of Indian equities."
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