NEW DELHI: The domestic equity market had a sharp fall last week after scaling new highs in the month of August and September.
The benchmark indexes -- BSE Sensex and Nifty50 -- lost more than 2% points each to end the week at 58,765.58 and 17,532.05, respectively.
Investors/traders were in profit booking mood from the beginning and the news of China’s energy crisis and the economy slowing down, a sharp decline in the tech-heavy Nasdaq and growing inflation worries further added to the pressure as the week progressed.
Ajit Mishra, VP Research. Religare Broking, said that the coming week is going to be critical for financial markets as participants will be closely eyeing the MPC’s monetary policy review meet and its outcome is scheduled on October 8.
Besides, the week also marks the beginning of the earnings season and IT major Tata Consultancy Services (TCS), will announce its results on October 8. Before that, we have Nikkei Services PMI data scheduled on October 5.
“Markets may continue to trade under pressure citing weak global cues. Besides, the scheduled data and events on the domestic front would further add to the volatility in between. On the benchmark front, Nifty has immediate support at 17,450 and a decisive breakdown may result in a further decline towards the 17,300 zone. In case of a rebound, the 17,600-17,700 zone would act as a hurdle,” said Mishra. He added that the prevailing buoyancy in the midcap and smallcap space may continue to offer opportunities, but it’s prudent to maintain a cautious approach and prefer hedged positions.
Santosh Meena, Head of Research, Swastika Investment said global cues and RBI policy will be important triggers.
“The market is showing some signs of correction after a stellar run as global markets are shaky amid worries of inflation and slowdown. Though the broader market outperformed last week, the IT sector, the leader of this bull run witnessed sharp profit booking. If the leader of the bull run starts to correct first then there is a risk of the near-term top in the market but we have to look for more clarity from here,” said Meena.
In the last one week, Nifty IT has given a return of negative 6% with TCS’ and Infosys’ stock falling by 4% and 5%, respectively.
Eight of the 10 most valued companies witnessed a combined erosion of over Rs 1.80 lakh crore in their market valuation last week, mainly dragged down by TCS and Infosys.
Meena said from TCS’s Q2FY22 result, we may know whether it’ll be another quarter of strong earnings for IT sector, but most of the projections are priced in and the market has started to worry about attrition rate and margin pressure due to wage hike.
He added the movement of the dollar index, US bond yields will play an important role in the direction of global markets while crude oil prices will have a major impact on Indian markets.