Markets week ahead: Will Sensex, Nifty get breather from bears? GDP, auto sales, PMI data among key factors

Domestic market recorded its worst weekly drop in eight months with feeble global cues dominating the sentiment. Worries of more rate hikes have heightened as inflation is still higher than central banks like RBI and US Fed’s tolerance limit. Sensex and Nifty 50 ended the week below 59,500 and 17,500 levels. In the coming week, India’s GDP numbers alongside other economic data will influence the market’s tone. Auto stocks will be in focus too.

Sensex shed 141.87 points or 0.24% to end at 59,463.93. While Nifty 50 closed at 17,465.80 lower by 45.45 points or 0.26% on Friday.

In the week that ended on February 24th, Sensex tumbled by 1,538.64 points or 2.52%, while Nifty 50 dived by 478.4 points or 2.67%. More than ₹6.86 lakh crore of investors’ wealth has been eroded this week.

But domestic equities are in red since February 17th. From the last time when markets were in green which was February 16, Sensex has erased 1,855.58 points and Nifty 50 has dipped by 570.05 points in six trading sessions. In these six days, investors have recorded more than ₹8.30 lakh crore erosion in wealth.

According to Ajit Mishra, VP – of Technical Research, Religare Broking, markets traded under pressure and lost over two and a half percent, pressurized by weak global cues. The tone was negative from the beginning which further worsened as the week progressed.

Among the indices, Mishra added, “most sectoral indices traded in sync with the benchmark and ended lower wherein continuous pressure in the banking and financials combined with a fresh decline in metal and realty counters was largely weighing on the sentiment. The broader indices too settled with a cut of nearly 2% each.”

Meanwhile, Vinod Nair, Head of Research at Geojit Financial Services said, “the domestic market witnessed continuous selling during the week on the back of a weak global market and persistent FII outflows.”

Economic indicators and global cues played a key role in dictating domestic equities.

Nair said, global bourses were cautious as the US PMI numbers came in better than expected on the heels of strong jobs data and raising fears of aggressive Fed action. The minutes of the central bank policy meeting also revealed concerns over high inflation and its commitment to bring inflation under control.

Further, he said, in response to the heightened fears of rate hikes, the US 10-year Treasury yield moved near 4%. Additionally, the dollar index rose as the greenback cheered over hawkish Fed comments and rising geopolitical tensions. The resurgence of the cold war between the US and Russia has also brought apprehension to the market.

Factors to drive the market in the week ahead:

Key economic data, especially India’s GDP data along with global market performance will continue to have a large chunk in Indian markets sentiment. But also auto stocks will be in focus as the companies in this sector will present their January month sales figures.

Highlighting key factors to drive the market, Mishra said, “with the beginning of the new month, participants will be eyeing important macroeconomic and high-frequency data during the week. To start with, GDP data and Core Sector data are scheduled on Feb 28.”

Besides, he said, “S&P Global PMI Manufacturing and Services PMI data will be unveiled on March 1 and March 3 respectively. The auto sales numbers will also start pouring in from March 1. Apart from the domestic data, global market performance, and movement of crude and rupee will remain on participants’ radar.”

What should investors do?

Although the current pressures should be a short-term effect, Nair believes the fear of sanctions against Russia and its degree of implication on the economy, especially food and oil exports, is adding to the anxiety.

On the economic growth, Nair said, “India’s Q3FY23 GDP growth, scheduled to be released next week, is anticipated to moderate from 6.3% in the preceding quarter.”

Mishra pointed out that this week’s fall has almost engulfed gains of the last three weeks and Nifty has reached closer to the budget day low i.e. 17,353.40.

He believes there might be a breath in the week ahead initially but the tone is likely to remain negative, with the next crucial support at 17,100.

Further, correction in US markets could add to the pessimism. Amid all, the majority of the sectors are facing heat but the continuous underperformance of the banking and financials would remain the key concern, Mishra added.

To investors, Mishra said, “we thus recommend continuing with the “sell on the rise” approach until the Nifty shows some signs of reversal.”

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