MUMBAI: Markets could open on a rough note on Monday with the SGX Nifty trading 163 points below the Nifty closing of 17102.55 on Friday reflecting the deep cuts in the US market where the Nasdaq logged the worst monthly closing since October 2008. SGX Nifty is a derivative of the Nifty traded on the Singapore Stock Exchange.
The Nifty could move in a 3.4% range from 16805 - 17395 early next week with bias for the downside. The market could be very choppy with fear gauge India Vix closing at 19.41. A reading above 20 signals a rise in volatility. “Expect choppy markets going forward in a week filled with the market keenly eyeing the Fed meeting,” said Rajesh Palviya, technical head at Axis Securities.
“Results have clearly shown margin pressures on large IT and that could also have a bearing on markets.” Amid banks, despite strong results by Axis and ICICI Bank, the stocks corrected post their Q4 numbers, which shows the “weak market texture”, said SK Joshi, ED, Khambatta Securities. Joshi also feels the week would open on a “volatile “ note.
FIIs on selling spree
FIIs have sold Indian shares worth $2.23 bn in April so far, after having sold equities worth $18.47 bn, the most since they entered the Indian markvet in FY1999. FIIs are selling shares of EMs like India with the US Federal Reserve expected to raise its benchmark interest rate by 50 bps in the May meeting. In March, it raised the rate by quarter percentage point from near zero.
The rise in the US rate reduces the risk free rate of return for investors who borrow cheap money in the US to invest here. That spurs selling by FIIs who move back to the greenback, said Hormuz Maloo. From its high of 18604.45 on October 19 last year, Nifty traded down 8% last Friday. Over the same period, the dollar index, which measures the greenback against a basket of six currencies, is up 10% to 103.23, in anticipation of Fed tapering and rising interest rates in future.