On Friday, the NSE Nifty 50 index finished 1.63% lower at 16,411 while the S&P BSE Sensex fell 1.56% to 54,835.58. The Indian rupee weakened as much as 0.9% to 76.97 against the dollar earlier in the session, before settling at 76.91.
“Rapid shifts towards higher interest rates by major central banks across the globe soured the outlook on emerging market assets, wreaking havoc on domestic equity and bond markets. The stronger dollar globally and elevated crude prices also dented the sentiment for the rupee," IFA Global said in a note.
Macro data, earnings and global cues will determine the direction of markets next week, say analysts.
“Given a slew of macroeconomic releases, the current result season, and several IPOs that will open for subscription, the volatility seen this week is expected to persist. Global market movements will be determined by inflation numbers of United States and China. Data on India's industrial output, domestic inflation rates, and manufacturing output will keep Indian markets on edge. Following the surprise interest rate hike by the RBI, Indian inflation is largely predicted to be about 7.4%-7.5%, far more than the central bank's acceptable limit. However, a higher-than-expected inflation figure might worsen present sentiment. Investors are therefore advised to keep a long-term horizon and be extremely selective with their picks," said Yesha Shah, Head of Equity Research, Samco Securities.
Technical Outlook
“After consolidating for two weeks in a range, Nifty50 closed sharply lower and formed a big bearish candle. The index is now trading just at the previous support of 16,400. The short-term trend has turned bearish and it is likely that markets can further slide lower. Having said this, if we look at the larger picture, the benchmark index is trading mostly in a wider range of 16,400 to 18,400 since October. Therefore, a bounce from current levels also cannot be ruled out. Keeping this in mind, traders are advised to avoid initiating fresh shorts at current levels. Traders can maintain a neutral to mild negative bias and look for sell-on-rise opportunities. The immediate support and resistance are now placed at 16,000 and 16,800 levels," she added.
Markets will react to Reliance numbers in early trade on Monday and then focus would shift to the global cues, says Ajit Mishra, VP - Research, Religare Broking Ltd.
Reliance Industries Ltd , India's most valuable company, reported a 22.5% surge in fourth-quarter profit on Friday, helped by higher fuel demand and margins at its mainstay energy business.
“The increasing fear of aggressive rate hikes from the US Fed has spooked investors across the globe including India. On the index front, the Nifty has tested the crucial support zone of 16,400 and indications are in the favour of prevailing decline to continue with some intermediate pause/rebound. In case of any rebound, the 16650-16800 zone would act as a hurdle. Participants should align their positions accordingly and use rebound to create shorts," Mr Mishra said.
Nagaraj Shetti, Technical Research Analyst, HDFC Securities, says the short term trend of Nifty continues to be negative. “Having formed a doji and unfilled opening downside gap signal a possibility of minor upside bounce from here or from the lows in the next 1-2 sessions. Any upside from here could encounter strong resistance around 16650 levels. Eventually Nifty could decline from the highs and reach down to the next support of 16200 levels in the near term," he said.
