Equity markets dropped sharply as investors turned risk averse. Domestic equity markets fell prey to the selloff as benchmark indices, Nifty50 and Sensex, plunged 4 percent and 3 percent, respectively. The midcap index dropped 3 percent, whereas the smaller peers bled up 5 percent.
Markets have finally ended the 4-month long consolidation phase and look structurally weak now, said Ajit Mishra, VP Research. Religare Broking.
“The prevailing volatility is hard to trade, we thus suggest traders limit positions and wait for some stability,” he added. “Investors should use this phase to accumulate quality stocks on dips.”
In the coming week, Russia’s strikes on Ukraine will continue to headline across the globe, followed by key domestic factors including India’s GDP and output numbers. Auto sales figures for the month of February will also pout in during the holiday trimmed week.
Here are key factors that will guide markets in the week ahead:
The prevalent geopolitical tensions between Russia and Ukraine is likely to continue to create headlines and be a primary driver directing market direction and investor mood internationally.
If the current state of conflict between Russia and Ukraine continues and war intensifies, the global equity markets may sink further, say the market experts.
India’s GDP Numbers
The National Statistical Office (NSO) will report India’s gross domestic production (GDP) numbers for October-December 2021 quarter on Monday, February 28.
Global brokerage firm Barclays has projected a GDP growth of 6.6 per cent for the quarter ended December, 2021 (Q3FY22) and 10 per cent growth for the full financial year 2021-22.
The country’s gross domestic product (GDP) is likely to grow at 5.8 per cent in the third quarter of fiscal 2022, according to an SBI’s research report.
In the week ahead, Federal Reserve Chair Jerome Powell testifies before the US Congress on the economic outlook and recent monetary policy actions, and how the Russia-Ukraine conflict could affect Fed policy. The event will guide the markets globally as the Fed had signaled aggressive rate hikes starting March 2022 to combat rising inflation.
Auto sales for February
The markets react well to the February sales numbers for the auto companies. In January, a few auto players, including Maruti Suzuki and Bajaj Auto, reported a decline in their sales, whereas the remaining reported decent sales such as Tata Motors.
Despite the near-term headwinds, the long-term outlook is largely positive, with most automakers anticipating a gradually improving chip shortage situation. India is focusing on enhancing the electric vehicle (EV) ecosystem in the country.
India’s purchasing Managers’ Index (PMI) numbers, a survey results conducted on manufacturing firms throughout the country, for February 2022 will be out on Wednesday, after the market being closed on Tuesday on the occasion of Mahashivratri. In February, it is expected to rise as the pandemic worries eased and states lifted their restrictions.
India’s services sector activity moderated further in January as new business rose at a noticeably slower rate amid the escalation of the pandemic, reintroduction of restrictions and inflationary pressures.
Nifty50 index closed on a strongly negative note for the week, breaking below the crucial support zone around 16,800 levels. Albeit the sharp rebound seen on Friday, the index failed to recoup all the losses, said Yesha Shah, Head of Equity Research, Samco Securities.
“The bounce can be a good exit opportunity for short-term traders. Until Nifty breaks above 17,500 levels, we suggest traders maintain a bearish outlook. Immediate support and resistance are now placed at 16,200 and 16,900 levels,” she adds.