Amid banking turmoil, Fed and BOE policy will set market sentiment next week

on Friday, Sensex It closed at 57,989.90, up 355.06 points or 0.62%. The Nifty 50 closed at 17,100.05, up 114.45 points or 0.67%. Bank Nifty advanced nearly 466 points or 1.2%, while BSE Bankex gained 541 points or 1.2%.

Domestic equities started the week ended March 17 in the red on fears of contagion by banks following the collapse of Silicon Valley Bank and Signature Bank, but some liquidity in the last two trading sessions was provided by lifelines to lenders such as . credit Suisse and First Republic Bank, which quelled the panic selloff. Also, better-than-expected inflation data contributed to lifting sentiment. However, persistent foreign fund outflows limited the gains.

Talking about the current week’s performance, Vinod Nair, Head of Research, Geojit Financial Services, said, “Domestic indices followed in line with global markets, which took a breather towards the end of the week on hopes of respite from global banking turmoil Sigh.Global equities reversed their selling streak on reports of a rescue package for crisis-hit First Republic Bank with aid provided to Credit Suisse from the Swiss central bank that would calm concerns over global financial stability.

Besides, Shrikant Chauhan, Head of Equity Research (Retail), Kotak Securities highlighted, global equity markets reacted to the crisis in US and European banks. Indian markets were under pressure from these global developments. Accordingly, major domestic benchmark indices Nifty-50 and Sensex-30 were down during the week. Broader indices including BSE Midcap, BSE Small-cap and most sectoral indices also gave negative returns this week. On the economy front, India’s February 2023 CPI inflation moderated to 6.44% and trade deficit remained under control with modest growth (over January 2023) in exports and imports. Crude oil prices fell sharply this week amid the recent banking crisis. The yield on the 10-year US Treasury was lower than last week. Meanwhile, the European Central Bank hiked interest rates by 50 bps and continued its policy tightening measures.

This week, the Sensex fell 1,145.23 points or 1.93% and the Nifty 50 fell 312.85 points or 1.8%.

According to Ajit Mishra, VP – Technical Research, Religare Broking, markets remained under pressure for the second consecutive week and lost nearly 2% due to weak global cues. The tone was negative from the start, which worsened as the week progressed, although a rebound in the final session nullified some of the losses. The US banking crisis remained center-stage and kept participants on their toes. Besides, the steady outflow of foreign funds added to the concern. Finally, the benchmark indices, Nifty and Sensex closed at 17,100.05 and 57,989.90 respectively. Meanwhile, stress was seen in the banking, financial, auto and IT sectors in the range of 1%-4%. Broader indices also saw a decline, with each losing more than 2%.

What to expect next week?

“The softening of US inflation gives confidence that the Fed will not opt ​​for a drastic rate hike of 50 bps and may even consider taking a break during the March meeting,” said Nair. Persistent adverse cues in global markets are making investors look for safe havens. in the form of dollar and gold, while FIIs withdraw funds from the domestic market in response to the depreciation of the Indian rupee. Considering the 50 bps rate hike by the ECB, all All eyes will be on the US Fed and the Bank of England, who are scheduled to hold their policy meetings next week.

In addition, Chauhan said, “Market participants will be keenly watching for next week’s Federal Reserve policy decision.”

Mishra pointed out that in the absence of any major domestic events, focus will shift to the upcoming FOMC meeting scheduled for March 21-22. Besides this, crude oil volatility and overseas inflows trend will also be in focus for signals. “Market may take a breather initially, but gains also seem to be stalled. Nifty may face hurdles around 17,250-17,400 zone, while 16,600-16,800 zone may provide necessary relief if situation worsens further,” he said. will provide.”

For traders, Mishra said, “Since we are witnessing a mixed trend across sectors, traders should continue to focus on overnight risk management with a stock-specific approach.”

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