The high volatility can be gauged from the fact that the Sensex made a swing of 965 points during the day from its day’s high to day’s low while the Nifty swung by 296 points. The BSE Sensex opened the day on a strong note with a gain of 518 points at 57,795 and continued edging up to make an intraday high of 58,084 but erased all its gains in the afternoon session to make an intraday low of 57,119. The Nifty opened with a gap of 98 points at 17,208, made an intraday high of 17,374 before losing steam to make an intraday low of 17,077. ”After the decent opening post yesterday’s weak closing, domestic bourses again staged a quick sell-off, tracking weak European trend,” said Vinod Nair, Head of Research at Geojit Financial Services.
On January 28, the Indian benchmark indices saw strong volatility and closed the day with minor losses. The markets maintained their upbeat tone from yesterday, with a big gap-up opening, but the gains were quickly erased in the afternoon session, as bears retook control from the bulls. The 30-share Sensex was down 76.6 points, or 0.13 percent, at 57,200.3, while the Nifty was down 8.2 points, or 0.05 points, at 17,101.95 at the closing.
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Policy tightening by the US Fed and rising geopolitical tensions in Ukraine coloured global sentiments, he added. On the NSE, all sectors traded in the green in the first half but lost out in the second half with losses in Nifty Bank and NiftyAuto. The broader markets outperformed the benchmark indices with BSE Midcap gaining 1.02 percent and BSE Smallcap higher by 1.07 percent. “The broad market ended mixed considering IT, realty and Mid & Smallcaps rebounded after continuous heavy-selling this week,” Nair added. India VIX, which indicates the degree of volatility traders expect over the next 30 days, moved down 1.83 percent from 21.06 to 20.68 levels.
“Volatility cooled down but is still hovering at higher zones from last three sessions signalling volatile swings in the market,” said Chandan Taparia, Vice President/Analyst-Derivatives at Motilal Oswal Financial Services. Maruti Suzuki, Tech Mahindra, Power Grid Corp, ICICI Bank and Hero Motocorp were the top Nifty losers for the day losing between 1.5 percent and 3.1 percent. NTPC, UPL, Sun Pharma, ONGC and IndusInd Bank were the top gainers on the Nifty gaining between 1.7 percent and 3.8 percent. The long build-up was seen in Laurus Labs, CanFin Homes and Bata India while a short build-up was seen in TVS Motor, Chambal Fertilizers and RBL Bank.
Among individual stocks, a volume spike of more than 76 percent was seen in Dixon Technologies, while Atul and LIC Housing Finance saw a volume spike of about 34 percent and 26 percent, respectively. On the BSE, out of 3,458 stocks traded, there were 1,365 declines and 1,988 advances while 105 stocks remain unchanged. “The Nifty formed a Bearish candle on the daily scale with long upper shadow even after negating its lower highs formation of the last six sessions,” said Taparia of Motilal Oswal. “It formed a Bearish candle on the daily and weekly scale and has been forming lower highs-lower lows from the last two weeks.” Now it has to hold above 17,000 zones, to start the next leg of bounce towards 17,350 and 17,500 zones whereas support exists at 16,850 zones.
Global peers have been facing corrections for quite some time now and are spooked by rising bond yields and oil prices. It seems Indian markets are now echoing the global sentiment. Indian markets followed most global equity markets in decline, as the US Fed indicated the withdrawal of accommodative monetary stimulus and raising of interest rates to tackle persistent high inflation. As such, bond markets witnessed a sharp increase in yields. History suggests that in 7 out of the last 10 years, Indian indices have delivered negative returns or remained range-bound in the week preceding the Budget. And 2022 was no different. FPIs sold equities worth US$2.8 billion over the past five trading sessions, while DIIs bought US$730 million over the same period. Domestically, aggregate Q3FY22 earnings prints of Nifty-50 companies were ahead of expectations.
The Nifty was at 17,144 with a loss of ~2.7 percent and the Sensex was at 57323 with a loss of ~2.9 percent during the end of the week on January 28, 2022. The Nifty smallcap index and midcap index echoed the Nifty and Sensex during the week with losses of ~2.1 percent and ~3.2 percent respectively. All the sectoral indices ended in red during the week except for Bank Nifty and BSE Auto. BSE IT and BSE Consumer durable were the top two losers with a loss of ~5.4 percent and ~6 percent respectively. Indian VIX was up 9.8 percent in the past one week.
This week, the US Federal Reserve announced the final round of its asset purchases. It will thus conclude its balance sheet expansion in March 2022, much ahead of its initial plan. The Fed will subsequently start to increase interest rates in the economy beginning March. Both these measures are aimed at taming inflation, currently at a four-decade high of around 7 percent. Meanwhile, the US economy grew at an annualised rate of 6.9 percent in the fourth quarter. That was well above the 5.5 percent median forecast from economists surveyed by Bloomberg. The data also showed growth accelerated from the 2.3 percent pace in the third quarter. Even European investors reacted negatively to the Fed’s indication on Wednesday that it could soon raise interest rates for the first time in more than three years, and to rising geopolitical tensions between Russia and the West over Ukraine.
Markets ended almost unchanged in a volatile trading session citing mixed indications. Initially, the benchmark was trading firm; however, profit-taking in the latter half pared all the gains. Meanwhile, the broader markets witnessed healthy buying interest and both midcap and smallcap ended higher by over a percent each. A mixed trend was witnessed on the sectoral front wherein auto and banking ended with losses while IT, telecom, and oil and gas closed in the green. All eyes are on the Union Budget now which is scheduled for next week, on February 1. We expect a growth-friendly budget but also expect the government to lay out a path for fiscal consolidation. Besides, earnings and global cues would remain on participants’ radar. We reiterate our cautious view and suggest continuing with hedged positions.
The market, all through the week, witnessed selling across market cap and sectors, and obviously displayed signs of being in a bear grip, as it traded lower, breaking certain key technical levels. The normalisation of liquidity, and the likely hike in the key policy rate in the US accelerated the fall in the US markets and Europe, and the same was reflected in emerging markets too. The domestic market has seen a huge selling by overseas investors, and this aspect has been the main factor dampening the sentiments to a large extent. The coming week will be influenced to some extent by the expectations from the Union Budget which will be presented on February 1, 2022. The outlay on infrastructure, the expansion of the PLI scheme, the fiscal consolidation path post the pandemic, and the specific measures to boost consumption are some of the things which the market is eagerly waiting for. An aggressive budget along with reasonably good earnings performance could counter the pace of the sell-off in the markets to a significant extent.
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