MUMBAI: Nifty and Sensex could gap down by at least 1% at opening on Monday and remain under pressure, with the SGX Nifty last closing at 16029.5, reflecting the overnight carnage on the Dow Jones and Nasdaq. The Nifty closed Friday at 16201.8 Friday. Downside pressure could continue during the week, with the impending US FOMC policy meeting on June 14-15, which will set the tone for markets globally.
The Dow closed down 2.5% or 880 points and the Nasdaq 3.5%, or 414 points, Friday after data showed US CPI inflation in May rose 50 bps more than expectations to 8.6%. This stoked fears among market participants that the US FOMC could raise an interest rate more aggressively when it meets this week.
The Nifty is likely to test the 16000 level on Monday itself. Closing below 16000 will set the stage for a test of the March low of 15671. On May 12 and May 19, the market came close to the March low level but bounced from 15736 and 15775 each. Market analysts expect the low of 15671 to be tested this week.
“The support of 16000 could become a resistance, going forward,” said Hormuz Maloo, director of AFco Investments. Rohit Srivastava, founder, IndiaCharts, expects Nifty to face downside pressure and eventually test 15000 in the current month.
RBI’s monetary policy committee on May 8 raised the key repo rate by 50 bps to 4.9% and changed its stance to focus on withdrawal of accommodation from remaining accommodative. Global markets have been spooked by rising food and fuel inflation, exacerbated by the rise in Europe.
The fall in Indian markets from a record 18604.45 on October 19, last year to 16210.8 on June 10. Since October last year, FIIs have sold shares worth a whopping Rs 2.19 lakh crore worth of Indian shares. Domestic investor buying has partly absorbed the selling by FIIs so far, enabling Indian indices like Nifty and Sensex to be relative outperformers. While the Dow Jones, for instance, is down 15% from its record, the Nifty has corrected 12.9% and the Sensex by 12.75%.
However, analysts expect FII selling to intensify if the FOMC hikes rates more than anticipated or becomes more hawkish. Meanwhile, retail investors stepped up their purchases of equity-oriented schemes of Mutual funds, investing Rs 18529 crore in May from Rs 15890 crore in April.
50 bps Increase in repo rate
Rs 2.19 L Worth of shares FIIs sold since Oct