Domestic markets are likely to open flat on Monday amid mixed global conditions. NSE’s monthly F&O settlement on Thursday will add to market volatility. Analysts expect large-cap stocks to remain somewhat stable, while small- and mid-cap stocks are expected to see increased volatility.
Asian stocks traded in a tight range, while Chinese shares continued to suffer weakness on property stocks. U.S. stock futures edged higher after a week of losses for major benchmarks as investors retreated in the face of rising long-term bond yields following hawkish comments from Federal Reserve policymakers.
Read: Index Outlook: Nifty 50, Sensex above key support
Gift Nifty is at 16,700 points, indicating a slight positive outlook for the domestic market.
Arvinder Singh Nanda, senior vice-president, Master Capital Services Ltd, said: The benchmark index has been falling for the past few days.
JPMorgan has added Indian government bonds to its emerging market bond index, an inclusion that will lead to massive inflows into the economy. The JP Morgan index is at $240 billion, with a 10% weighting on India, which will ease borrowing pressure. This will be positive for banks, non-banking financial institutions and public sector companies, he said.
However, relations between India and Canada are deteriorating as the two countries announced the expulsion of each other’s diplomats. Of note is Canada Pension Plan Investment Board (CIPB)’s Rs 174-crore investment in India. It is expected that if this tension escalates further, some pressure may arise,” he added.
The FPI sell-off that started early this month continued into the week ended September 22. This month, out of 15 trading days, FIIs have seen selling on 11 trading days so far. According to NSDL data, FPIs sold equity stakes for Rs 10,164 crore from September to 22. This figure includes large transactions and investments through the primary market. So far this month, FII sales in the spot market stood at Rs 18,260 crore.
Dr. VK Vijayakumar, chief investment strategist at Geojit Financial Services, believes that with valuations still high even after the recent correction and US bond yields attractive (US 10-year bond yield is around 4.49%), FIIs are likely to Selling down over long periods of time continues as this trend continues. When the US 10-year Treasury yield is around 4.49% and the US dollar index is above 105, it is unreasonable to expect FIIs to buy aggressively.
Analysts say the current correction is healthy given the sharp rise in prices. They expect profit-taking to continue.
Dr. Joseph Thomas, Head of Market Research, Emkay Wealth Management.
“From the beginning of the week to the last trading day, the stock market traded lower, mainly affected by U.S. monetary policy and U.S. market developments. Although the Federal Reserve announced that it kept the federal funds rate unchanged, its guidance on future interest rates pointed to the possibility of future rate hikes. There is a strong possibility that there will be at least one rate hike before the end of this year. The possibility of further rate hikes unsettled the market, with US markets falling first, followed by European and Asian markets. There is also a profit booking factor at play, although this may be a Transient factors, there is also some selling in FPIs. Factors affecting the market may also continue to exert some pressure in the coming week.”