Indian market extended the rally in the second (truncated) week ended March 17 adding almost four per cent as foreign institutional investors (FIIs) turned net buyers after 10 weeks, tensions between Russian and Ukraine de-escalated and crude oil prices fell. For the week, BSE Sensex rose 2,313.63 points (4.16 per cent) to end at 57,863.93 while the Nifty50 added 656.6 points (3.94 per cent) to end at 17,287.05. All sectoral indices ended in the green with Nifty Auto and Bank indices up over 5 per cent each and Realty index rising 4.7 per cent. Broader indices — BSE mid-cap and small-cap — added two per cent each, while large-cap index rose four per cent.
Ajit Mishra, VP Research. Religare Broking, said: “Markets extended rebound and gained nearly 4 per cent, largely tracking favourable global cues. The optimism around the de-escalation of war between Russia and Ukraine combined with a sharp dip in the crude aided sentiments. Moreover, no negative surprise from the US Fed also came as a relief for investors. Consequently, both the benchmark indices, Sensex and Nifty, ended closer to the week’s high to settle at 57,863 and 17,287 levels. All the sectoral indices participated in the move and the broader indices too posted decent gains."
In absence of any major event, global cues viz. Russia-Ukraine war, COVID situation in China and movement of crude will remain in focus. Besides, participants will be also be eyeing FIIs flow for cues.
Santosh Meena, Head of Research, Swastika Investmart Ltd., said: “FIIs who were selling relentlessly for the last five months comeback last week with some buying and it will be interesting to see how the market will perform when they continue their buying. In the last 5 months, they have sold more than 2.3 lakh crore in the Indian equity market which is their higher ever selling. Earlier, their highest selling was at the time of the global financial crisis in 2008 which was around 1.3 lakh crore."
“The interesting point here is that in 2008, Nifty and Sensex had corrected 60-65 per cent due to selling of 1.3 lakh crore by them but this time, Nifty and Sensex only corrected around 15 per cent despite much higher selling by FIIs. Domestic money shows strong resilience this time and we are no longer fully dependent on FIIs’ flows. Our markets are in a much better shape compared to most of the emerging markets and we have witnessed a strong rally from lower levels therefore there might be some feeling of missing out among FIIs and they may come back aggressively in the Indian markets that may fuel a further rally in our market," Meena said.
On a similar pattern like US Fed, the Bank of England hikes bank rate by 25 basis points to 0.75 per cent. Given the current tightness of the labor market, continuing signs of robust domestic cost and price pressures, and the risk that those pressures will persist, the Committee judges that an increase in Bank Rate of 0.25 per cent points is warranted at this meeting. The committee expects inflation to shoot up to 8 per cent in 2022 Q2, and perhaps even higher later this year. According to the committee, the effects of Russia’s invasion of Ukraine would likely accentuate both the peak in inflation and the adverse impact on activity by intensifying the squeeze on household incomes.
With both major central banks opting for a rate hike in the recent scenario, in India, the focus will now shift at RBI which will be presenting the country’s first bi-monthly monetary policy in early April.
Talking about Friday’s performance, S Ranganathan, Head of Research at LKP securities said, “Positive Global Cues post the Fed rate hike, softening oil prices and progress in Russia- Ukraine talks boosted the confidence of the Bulls.
Nifty Technical Outlook
Technically, Nifty is giving proper follow-up of bullish engulfing candlestick formation on weekly chart whereas it managed to close above its 200-DMA and 50-DMA however 100-DMA of 17380 is an immediate hurdle; above this, we can expect a further strength towards 17,600/17,800 levels. On the downside, 17,200 should act as an immediate support level while 200-DMA of 17000 will be a strong base at any pullback.
Banknifty also witnessed a strong pullback from lower levels however 36,700-37,300 is a critical resistance area and if it manages to take out this area then we can expect a short-covering rally towards 38,000/38,500 levels. On the downside, 36,000 is immediate support while 35,500/35,000 are the next support levels.
What Should Investors Do?
Mishra said: “The recent rebound has certainly eased some pressure however sustainability would largely depend upon global cues. Any news of escalation in the Russia-Ukraine tussle and deterioration of the COVID situation in China could again dent the sentiment. Amid all, we suggest maintaining a positive yet cautious approach while maintaining focus on overnight risk management. On the index front, Nifty has potential to test 17,500-17,700 zone. In case of any dip, 16,800-17,000 would act as a cushion. Among sectoral packs, metal, energy and pharma are likely to outshine others so plan your trades accordingly."