Equity market barometer the Sensex saw strong volatility in intraday trade on June 16 after the US Fed raised rates by 75 bps.
After opening in the green and rising 600 points, Sensex erased all gains and plunged more than 1,000 points. The index finally closed 1046 points, or 2 percent, lower at 51,495.79.
A 75 bps rate hike was the US Fed was on expected lines. In the early hours of trade, the market took comfort from the Fed chief's comments and guidance. However, aggressive rate hikes have stoked the fear of a recession which is keeping the market down.
"Powel's remark that the Fed has the tools and resolve to achieve price stability reflects confidence in containing inflation. His guidance of a 3.4 percent rate by end of 2022 and a 3.8 percent terminal rate in 2023 refect the determination to fight inflation. However, the presently unknown factor is whether the rising rates will tip the US economy into recession," said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
Vijayakumar advises investors should follow a cautious investment strategy without taking aggressive bets.
"Take a long-term view and use dips in the market to slowly accumulate fairly priced high-quality stocks such as leading banks, leading IT, pharma and select autos. Increase the cash component in the portfolio to exploit any probable sudden changes in outlook and market trend," he said.
Now the US FOMC is done and most factors are on the table for the market. The market is likely to react to geopolitical tensions, the progress of the monsoon and global updates in the near term.
MintGenie talked to various experts to understand what will be the top triggers for the market in the near term. Here's what they have to say:
Narendra Solanki, Head- Equity Research (Fundamental), Anand Rathi Shares & Stock Brokers
With Fed policy meet out of the way and the clarity provided by the Fed on pace and terminal rates. The risks of a surprise move are largely over on the monetary front.
Henceforth, the markets would be focusing mainly on data on inflation, GDP growth and corporate earnings. Also, any positive developments in the existing Ukraine crisis would be watched as it could help improve existing supply side issues sooner than later.
G. Chokkalingam, Founder & Head of Research, Equinomics Research & Advisory
The real trigger for the domestic equity markets would be crude oil price as it is linked to inflation, trade deficit and rupee weakness, which are all crucial for markets.
There should be visibility of oil falling closer at least to $100 a barrel. Oil becomes more crucial now as almost the middle path of the US FED rate hike cycle is touched. Global markets would slowly start discounting the same.
The second trigger would be the current monsoon performance. Any major failure of the monsoon would act as a major risk factor. It is not all that important from a growth perspective as agri sector accounts only for around 18% of total GDP.
However, its performance is crucial from an inflation perspective as India is witnessing a record high inflationary condition now.
Vinod Nair, Head of Research at Geojit Financial Services
The biggest trigger could be the halt of the Ukraine-Russia war and the opening-up of the Chinese economy. However, when we are bound to realize the benefits of a slowing down war is unknown and the Chinese economy can be expected to be reopened during the year.
For India, the biggest boon will be the stoppage of FIIs selling, which is the main cause of ongoing corrections, which is possible if the global inflation starts to break down due to both of these factors leading to falling in commodity prices & opening up supply.
Mitul Shah- Head of Research at Reliance Securities
The overall equity market is under pressure globally due to high inflation, elevated levels of commodity and energy prices, supply issues due to Covid spread in China and other geopolitical issue coupled with central bankers hiking rates at regular intervals. India is no exception to this and cross linkage has bearings on Indian equity as well.
However, any positive development in the Russia-Ukraine tussle, a normal monsoon giving booster to the rural economy and softening in commodity prices could be the triggers for markets in the near term.
Nirav Karkera, Head - Research, Fisdom
The top triggers for the market would include developments around the Russia-Ukraine war, the US Fed’s actions as it attempts to strike a balance between raging inflation and tepid economic growth, commodity prices especially that of crude oil and the degree of demand robustness.
Akhilesh Jat, Category Manager - Equity Research, CapitalVia Global Research
Major equity indices declined in the calendar year 2022 ahead of the rising interest rates, high inflation and Russia’s invasion of Ukraine. Inflation data and companies' earnings in the first quarter of FY23 will decide the market directions.
Choppy movement in the broader market is expected and it (Nifty-50) may remain within the range of 15700-17200. The near-term market trend is weak and a breakout below 15670 can drag down towards 14700 levels in the near term.
Disclaimer: The views and recommendations made above are those of individual analysts or broking firms and not of MintGenie.
