In a volatile market, what should investors be looking for this week

The Sensex and Nifty 50 both fell about 4% last week (May 9 to May 13). Although the last two trading sessions were slightly red and tilted almost towards the flat stick, the tone remained bearish.

On Friday, the Sensex closed at 52793.62, down 136.69 points, or 0.26%. Heavyweights SBI, ICICI Bank, Axis Bank, Bharti Airtel, Maruti Suzuki, HDFC Bank, Bajaj twins and Tata Steel pulled the standard and offset gains from Sun Pharma, HUL, Reliance Industries, Titan, ITC, Dr. Nestle.

The Nifty 50 settled at 15,782.15, down 25.85 points, or 0.16%.

Smallcaps has outperformed both exchanges over the past day, while some notable gains were also seen in the mid-highs. In terms of sectoral indices, auto stocks, consumer durables, and pharmaceuticals were the best performers, while banking and metals stocks were the top performers.

“Ongoing concerns about a weak rupee, higher global interest rates, high inflation numbers and shutdowns in China have kept markets on edge this week,” said Vinod Nair, head of research at Geojit Financial Services.

Yesha Shah, Head of Equity Research, Samco Securities, said, “Nifty 50 ended the week sharply negative and is now trading around a strong support level at 15.700 which coincides with the lower end of the descending sloping channel. BankNifty is also trading near the upside. Line support formed trend from March 2020 lows.”

Shah added, “Both the major Indian and global indices are at oversold levels. Therefore, an immediate recovery in Nifty and BankNifty is highly likely.”

In the past five trading sessions, the wealth of BSE investors has been largely wiped out R13,83,637.96 crore Rs. On Friday, the market value of BSE was stable at R2,41,34,078.84. On May 6, the market value was there R2,55,17,716.8 crores.

FPIs continued to be a net seller last week. Now, in the early weeks of the May trading session, the flow of FPIs stands at R25,216 crore in the stock market, according to NSDL data. Indian stocks dump so far in May has already exceeded the outflow R17,144 crore for the whole month of April. So far in 2022, the stock market outflow has been at the level R1,52,378 crores.

Retail inflation in India reached an eight-year high of 7.79% in April due to higher food prices. Inflation remained above the Reserve Bank of India’s top target of 6% for the fourth consecutive month.

Four subscriptions worth approx RRs 26,500 crore entered the public subscription markets last week. The R20,557 crore IPO of LIC which is the largest so far in the market, being oversubscribed 2.95 times, while RThe IPO of Corporate Advisory Services was fully subscribed at Rs 538.61 crore at 1.22 times. The RThe initial public offering for delivery of Rs 5,235 crore was oversubscribed at a rate of 1.6 times and RThe initial public offering of Venus Pipes & Tubes at Rs 165.42 crore was oversubscribed 16.31 times on the last day.

In terms of the Indian rupee, the local currency settled down 5 pounds at a lifetime low of 77.55 against the dollar on Friday.

Gaten Trivedi, Senior Research Analyst at LKP Securities, said, “The rupee traded today in a range-bound session near 77.45 as the dollar index traded after a strong rally that traded flat. On a weekly basis, the rupee closed very weak, down about 1% compared to the week In the past, where interest rate hikes too quickly played a negative impact on public sentiment.”

Going forward this week, WPI inflation numbers, LIC list, rupee-dollar movement, upcoming IPOs and fourth-quarter earnings along with global signals performance will all influence sentiment in the market.

This week, three valuable IPOs R2,387 crore will be available for general subscriptions. These – Paradeep Phosphates IPO, Ethos IPO and eMudhra IPO.

Shah said, “With results season nearing its peak, D-Street will move in sync with the flow of global news. India’s WPI data will be released next week and the much-anticipated initial public offering, LIC, will be listed on the stock exchanges. Apart from that, there are no Other major events expected. Absent any positive catalysts, indicators are expected to remain under pressure as selling starts on every bounce.”

“The higher-than-expected US CPI data indicates that inflationary pressure will continue in the near term. However, it is supposed to have peaked and will gradually decline in line with the continued decline in crude oil and other commodity prices, the slowing economy, The Fed surprised the market with a hawkish stance, limiting liquidity, limiting further setbacks in the future.”

Moreover, Nair said, “We can expect stability in the market as the sale of FIIs reduces inflation and Fed policy. On the other hand, DII lost their confidence after bearing continuous losses.”

What should investors be looking for this week?

According to Nair, given the current volatility in the market, investors prefer defensive sectors like IT and pharmaceuticals backed by weak INR. Going forward, the key determinant of market direction will be the pace of lower inflation in response to the Fed’s actions.

Shah said, “Based on how Nifty opens next week, very aggressive traders may start long positions with a tight stop just below 15700. Immediate resistance is now set at 16600 levels.”

“So we urge investors to stay on the sidelines because it is better to wait for the storm than to go fishing in the depths during these turbulent phases,” Shah added.

Concerning the rupee, Trivedi said: “You will see the rupee weaken at any rise until the time of market prices in a price-raising cycle”

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