Markets down over 1%, await signals from Budget, US Fed

Markets also remained cautious ahead of the Union Budget and the US Federal Reserve meeting next week. Nifty closed 1.25% lower at 17,891.95, slipping below the psychological 18,000 mark. The Sensex also closed down 1.34% on Wednesday.

Banks and financial services stocks also saw significant recovery in oil and gas, energy, infrastructure, realty indices. All the sectoral indices closed with losses.

Siddhartha Khemka, head of retail research at Motilal Oswal Financial Services Ltd, said volatility was seen in domestic equities amid monthly derivatives expiry and fall in global markets. Strong selling in them.

Vinod Nair, Head of Research, Geojit Financial Services, attributed the significant selloff in Indian equities to apprehension in the market ahead of the upcoming Budget and Fed meeting next week. Nair said sentiment was weighed down by continued selling by FIIs, where funds are being shifted to other emerging markets due to attractive valuations. He said the weak economic growth outlook dragged down global markets fueling fears of a recession.

Experts believe that a major trigger is needed for the market to break above or below this range. Analysts said two key events next week on February 1, i.e. Fed’s decision on budget and interest rate, could impact the markets and help the indices move out of the narrow range. While a good Budget and positive US Fed commentary may help markets move out of the upper band. However, any negative budget proposal such as raising the long-term capital gains tax rate or worse than expected could break the lower end of the Fed range, experts believe.

“Foreign inflows have been relatively weak, as relative valuation attractiveness in China has drawn incremental inflows, but this phenomenon is expected to be offset by strong growth numbers,” said S Hariharan, Head of Institutional Equity Sales at Emkay. Global Financial Services.

Foreign portfolio investors (FPIs), who have been net sellers of equities 13,206.36 crore equity, net sales in January till 24th Equities of Rs 2,393.94 crore on Wednesday.

The market volume has been very low in the month of January and the daily cash market volume 47,000 crore as against 56,000 crore in the October-December quarter, according to Hariharan. This is despite strong institutional participation, which averaged 27% of the daily market volume compared to 22% in the October-December quarter. Hariharan points to a weak sentiment from domestic retail participants, and this is reflected in the futures segment as well. The January rollover spread for futures positions has been cheaper than in the past 3 months, indicating relative reluctance from long positions to roll positions.

Meanwhile, the earnings season is in full swing and the markets are likely to take cues from the results and will also be closely watching the management’s comments.

Mitul Shah, head of research at Reliance Securities, said that as of now, 3QFY23 results suggest an uptick in revenue growth with some pressure on the margin front. Shah said the December US macroeconomic data was disappointing, pointing to a slowdown for the world’s largest economy. Meanwhile, the RBI noted that while some economies adapted and weathered the difficult conditions in 2022, the biggest risk in 2023 would be US monetary policy and the trajectory of the US dollar. Shah said sector and stock-specific movements are expected in the markets in the coming weeks in the wake of the Union Budget 2023.

Adani Group stocks saw huge correction in the range of 1.54-8.06% on BSE, with Adani Transmission stock witnessing maximum correction. Even ACC and Ambuja Cements saw a fall of 7-8% on BSE.