Markets awaiting FED hike | CanIndia News


Markets have had a hot period over the past week and we’ve heard people talk about how we’ve decoupled from the US markets yet again. Fortunately, this talk of decoupling only lasted 24 hours and disappeared as quickly as it began.

BSESENSEX lost 952.39 points, or 1.59 percent, to close at 58,840.79 points, while NIFTY lost 302.50 points, or 1.70 percent, to close at 17,530.85 points. In the broader markets, the BSE100, BSE200 and BSE500 lost 1.48 percent, 1.44 percent and 1.41 percent, respectively. BSEMIDCAP lost 1.46 percent while BSESMALLCAP lost 1.12 percent. Benchmark indices lost in three of the five sessions and gained in two of them.

The Indian rupee gained 6 paisa, or 0.08 percent, to close at Rs 79.74 against the US dollar. The Dow Jones fell 1,329.29 points, or 4.13 percent, to close at 30,822.42 points. It lost in three of the five trading sessions and gained in two trading days.

In primary market news, shares of Tamilnad Mercantile Bank Limited were listed on the stock exchanges in the trade-to-trade category on Thursday, September 15th. At an issue price of Rs 510, the shares closed the trading day at Rs 508.45, down Rs 1.55 or 0.30 percent. On Friday they lost significantly more to close at Rs 493.75, down Rs 16.25 or 3.19 percent.

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The issue of Harsha Engineers Limited which had hit the markets with their new issue of Rs 455 crore and a sales offer of Rs 300 crore made history for the subscription received. The record was for the new rules subscription, which capped funding at a maximum of Rs 1 crore per applicant and split the HNI bucket in two. In total, the issue was subscribed 74.7 times. The QIB share was subscribed 178.26 times, the HNI share was subscribed 71.32 times, the retail share was subscribed 17.63 times and the employee share was subscribed 12.07 times. There were 26.40 Lac applications.

Last week the US markets came out first. On their (US) Tuesday night, they fell a dramatic 1,276 points on higher-than-expected inflation. Also, the consensus for a rate hike at this point in the subsequent Fed meeting, scheduled for September 20-21, is 75 basis points, with 74 percent of respondents believing the pedal to remain depressed and hike to 100 basis points could become. This triggered the sell-off and caused panic in the global markets.

Switch to India on Wednesday morning where we opened a gap down at 59,147.12 points on the BSESENSEX and 17,771.15 on the NIFTY. The opens were the lows and from there we recovered at some point before eventually closing at 60,346.97 and 18,003.75 respectively. The net loss was only 245 points on BSESENSEX and 67 points on NIFTY. Here we talked about the decoupling effect. Anyway, it all seemed short-lived, and by the way, Friday’s lows broke Wednesday’s swing low quite comfortably.

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Some other events that have taken place that need to be mentioned include the fact that retail liquidity observed over the past few weeks has taken a hit over the past few trading days. Mid-caps and small-caps, which moved strongly higher, fell over the two days. In addition, money seemed to dry up or purchases to be postponed. Second, investors wanted to wait for further investment until the results for the July-September quarters were announced later. Add to that the fact that FPIs have turned sellers for the last three straight days, investing 1,956 crore net in the first half of September. Domestic institutions net sold Rs 3,000 crore for the month.

Next week, the US Fed will meet Tuesday through Wednesday for its rate hike meeting. While a 75 basis point increase is quoted, even a 100 basis point increase may not come as a surprise. What should be closely watched is the commentary thereafter and what it implies for hikes in the two remaining meetings in the remainder of the calendar year. Additionally, the US markets have behaved unexpectedly in the last few instances following the results of the Fed meeting.

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Given the Fed’s uncertainty, expect markets to remain restless and volatile. Last week’s highs of 60,676.12 on BSESENSEX and 18,096.15 points on NIFTY will be key levels to break to the upside and hold for any rally to the upside. Otherwise the indices would come under pressure in the short to medium term. Assuming that the markets have the momentum to break and sustain, we should see upward movement see the markets attempt a move above the previous all-time highs in the near term.

On the other hand, in NIFTY we have support at 58100-200 and at 17300-350 points. The next level of support that could be called the last hope for the bulls would be 57,575-650 on BSESENSEX and 17,125-175 on NIFTY. If this breaches downwards, we could see the pace of the fall picking up. The strategy would be to buy on strong declines and sell on strong rallies. Markets will remain range bound and trade with volatility. Use the same to make profits.

(Arun Kejriwal is the founder of Kejriwal Research and Investment Services. The views expressed are personal.)

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