The volatility in the Indian stock market is expected to continue ahead of US FOMC minutes and GDP numbers later this week. However analysts believe sustained strength in banking and financial stocks to be pivotal for Nifty to surpass 25,200 mark, and reclaim bullish momentum. Despite choppy market sentiment, Indian stocks are seen as better option compared to global cues.
Sensex, Nifty:
After falling by 1,054.75 points to an intraday low of 81,121.70, the Sensex closed at 81,582.63. The benchmark dipped by 593.82 points, or 0.72%, during the closing bell. Meanwhile, Nifty ended at 24,826.20, down by 174.95 points, or 0.70%. This comes after the benchmark plunged by 297.05 points and an intraday low of 24,704.10.
India's volatility index surged by 3%.
With that, Indian market halted its two-consecutive days winning streak.
"The domestic market witnessed volatility and snapped a two-day rally, as investors opted for profit booking driven by valuation concerns and weakness across Asian markets. The benchmark index once again failed to decisively breach the 25k resistance level, reflecting the absence of positive triggers," said Vinod Nair, Head of Research, Geojit Investments in a note.
Further, he added, large-cap stocks underperformed, weighed down by subdued FII participation and lacklustre earnings from blue-chip companies. Conversely, mid- and small-cap segments remained relatively resilient, supported by better than estimated Q4 earnings and moderation in premium valuation.
On Tuesday, domestic institutional investors (DIIs) continued to make strong buying to the tune of Rs 10,104.66 crore on BSE and NSE. While foreign investors (FIIs/FPIs) buying has slowed to Rs 348.45 crore in domestic equities.
Also, rupee declined to hit 86 mark against US dollar, despite broad-based weakness in greenback. Sentiment in rupee was also fuelled by dovish expectations from RBI in the upcoming monetary policy.
The latest data showed that consumer inflation in India fell more than expected to a near six-year low in April, strengthening bets that the RBI is due to extend its cutting cycle. The central bank had already delivered back-to-back cuts to its benchmark repo rate after holding it at the over-four-year high of 6.5% for one full year, attempting to halt the slowdown in domestic growth. The RBI also delivered a series of liquidity injections into commercial banks after the its defense of the rupee drained domestic reserves and tightened financing conditions, as per Trading Economics.
Indian Stock Market Prediction For May 28:
With no significant domestic developments, markets now look ahead to key macroeconomic events, including Q4 GDP data on May 30 and the RBI policy meeting on June 6, said Satish Chandra Aluri, Lemonn Markets Desk.
"We are currently witnessing a tug of war between bulls and bears amid mixed global cues. However, favorable domestic factors such as a good monsoon and strong macroeconomic data are helping maintain a positive undertone," said Ajit Mishra - SVP, Research, Religare Broking.
Mishra added, "We continue to maintain a positive outlook on the market. However, sustained strength in the banking and financial sectors is crucial for the Nifty to overcome the 25,200 hurdle and regain upward momentum. In the meantime, traders should adopt a "buy on dips" strategy with a strong emphasis on stock selection."
Meanwhile, Prashanth Tapse, Senior VP (Research), Mehta Equities said, "Investors booked profit ahead of the monthly expiry on Thursday in spite of a positive sentiment in European markets and strong gains in US futures. While markets may stay choppy due to global uncertainty, India still offers a lot of solace to investors because of its strong growth factors."
On the technical front, Aluri said, the Nifty 50 reversed after testing the 25,000 level, found support near 24,700, and eventually closed above 24,800-maintaining a positive bias. On the upside, 25,000 remains a key resistance zone, while 24,700-24,800 serves as critical support on the downside."
Disclaimer: The recommendations made above are by market analysts and are not advised by either the author, nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.
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