Markets fall for second week on weak global cues

The equity market yet again ended the week in losses amidst macro global uncertainty. Nifty/Sensex fell 304/1142 points (-1.7%/-2.0%) to close at 17,172/57,197. Midcap100/Small100 too fell by 1.6%/1.9%.

Majority of the sectors ended in red with IT being the biggest loser – down 5.6% - on the back of weak results reported by IT biggies. It was followed by finance, media, realty and metal sectors which lost approximately 3-4%. On the other hand, energy continued to gain and was up 2.4%, while auto and infra witnessed buying interest and were up 3.1%/1.1%.

Foreign institutional investors (FII) continued to be net sellers, having sold equities worth more than Rs 18,000 crore while domestic institutional investors (DII) were net buyers to the tune of Rs 14,000 crore.

Global cues were weak as the likelihood of slowing economic growth on the back of aggressive monetary policy tightening, recent development in Ukraine and lockdowns in Shanghai led global markets towards ending in red for the second week in a row.

Hawkish comments from the US Fed chairman signalling more aggressive policy tightening in its next policy meeting led to a jump in the 10-year US Treasury yield and the dollar index. This, followed by the European Central Bank (ECB) Vice President acknowledging the possibility of a rate increase in July - potentially the bank’s first in 12 years - kept investor sentiments subdued.

Further, media reports suggested Russia’s more ambitious military campaign in the coming weeks leading to some nervousness in the market.

Also, Yen fell to a fresh 20-year low against the US dollar amid the Japan-US policy gap widening. Crude oil prices too surged in the last one week with the European Union considering a potential curb on Russian oil imports and have remained volatile since then.

Domestic equities continued to remain volatile during the week and ended in negative for the second consecutive week on account of weak global cues, acceleration in WPI inflation and below-expected results from Nifty heavyweights. Sectors like defence, sugar, paper and utilities were in focus following various news flows around positive demand outlook.

Global cues like hawkish Fed commentary, rising inflation & bond yields and slowing economic growth prolonged war in Ukraine and volatile crude prices is keeping markets uncertain.

Continuous selling by FIIs and weak results by a few heavyweights have further added pressure to the market. Now, till the Nifty remains below 17,350 zones, it may see weakness towards 17,000 and 16,950 zones. The index is likely to remain volatile in the broader trading range with an absence of follow-up activities on both sides. We suggest selective buying in the market in resilient stocks where the quarterly result has been good despite the current uncertain scenario.

(The writer is Head - Retail Research, Motilal Oswal Financial Services Limited)

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