On Friday, BSE Sensex closed at 54,835.58 down by 866.65 points or 1.56%. Nifty 50 ended at 16,411.25 below 271.40 points or 1.63%. A broad-based selloff was recorded across the basket. Huge profit booking in heavyweight stocks dragged the benchmarks, while midcap and smallcap stocks also took the beating. Consumer durables, metals, banking, auto, capital goods, and IT stocks were the worst hit.
On the 5th day, LIC IPO received bids of 29,08,27,860 equity shares against the offered size of 16,20,78,067 equity shares - subscribing by 1.79 times.
In the last five day's trading session, both Sensex and Nifty 50 have dropped by around 5%.
Vinod Nair, Head of Research at Geojit Financial Services explains that rate hikes by major central banks spooked investors' confidence.
"Rate hikes by major central banks dictated the global market trend this week. Although the Fed’s less hawkish rate hike of 50bps initially pumped in optimism, the need for a higher rate hike to tame elevated inflation levels wounded global markets with heavy selling. The Bank of England, while raising its interest rates, warned about a possible risk of recession. Further, the RBI’s sudden announcement of a 40bps increase in repo rate along with a 50bps increase in CRR, although anticipated, spooked investor confidence," Nair said.
Meanwhile, Ajit Mishra, VP of Research at Religare Broking said, "Markets ended 2-week long consolidation phase and lost over 4%, pressurized by weak cues. The tone was negative from the beginning and a surprise rate hike from the RBI pushed the bulls on the back foot. Sentiment further dampened in the final session due to increasing fear of aggressive rate hikes from the US Fed. In between, the mixed earnings announcements failed to provide any comfort. Eventually, both Nifty and Sensex settled closer to the week’s low settle at 16,411 and 54,835 levels respectively. Amongst the sectors, all the indices ended with losses wherein realty, auto, and metal were the top losers. The broader indices too witnessed a sharp cut and lost in the range of 4%-7%."
On the other hand, Nair also points out that domestic numbers like GST collection, auto sales, and PMI for the month of April give a sense of an improving economic outlook.
What to expect and focus on this week?
This week, Nair said, "the market will track inflation numbers across the globe. Although the numbers will remain high, the chances of a major market reaction are low given that the impact has already been factored in."
As per Mishra, this week, participants will first react to the Reliance numbers which were announced post-market on Friday. Besides, developments on the Russia-Ukraine front and the performance of global markets will be on the radar. On the macroeconomic front, IIP and CPI Inflation data are scheduled for May 12 and the market will be closing eyeing these numbers, to gauge the next possible move from the RBI in the June meeting.
On the earnings front, several prominent names like Asian paints, LT, Cipla, Tata Motors, SBI, and Siemens will announce their numbers along with several others.
In this range-bound market, Nair advised to stick with sectors that are expected to be least impacted by inflation & yield rise like banking, IT, Pharma, and themes like green energy"
"Markets are reeling under tremendous pressure and indications are in the favour of further decline ahead. Nifty has the next major support at 16,000 levels and the 16,650-16,800 zone would act as a hurdle in case of any rebound. Most sectors as well as the broader indices are trading in sync with the benchmark however select stocks are still holding strong. However, since global cues are largely dictating the trend, we recommend focusing more on overnight risk management and maintaining position on both sides," Mishra said.
