Will bears return to the market next week? Most likely, say analysts

NEW DELHI: Domestic benchmark indices finally closed in the green after four continuous weeks of closing in the red. Nifty and Sensex closed around two and a half per cent up, thanks to some buying seen in beaten-down counters.

The ongoing war in Europe continued to dominate headlines for another week, and it will keep affecting proceedings for the coming truncated week as well, believe analysts. Besides inflation data and central bank meetings will also be in focus.

“Amid sustained high inflation, the market will closely monitor announcements of the Federal Reserve meeting scheduled next week,” said Harsh Parekh, technical analyst, Bonanza Portfolio.

We may see fuel companies raising pump prices of petrol and diesel as the election is over.

Analysts are expecting a Rs 10-12 per litre rise, which if announced too quickly, could hit Dalal Street sentiments.

“The recent up move in crude has come as a surprise and is likely to impact petrol prices in the near term as participants keenly watch how the government will control its impact on end consumers with also fiscal deficit targets not getting breached,” said Parekh.

Commodities prices across the spectrum have shot up. Zinc, coal, crude oil, wheat, soybean, nickel, palm oil—prices for them and many others have risen, making companies and investors worry as they are used as raw materials by them.

“US CPI inflation recorded a 40-year high due to high gasoline, food and housing costs, adding doubts to the global trend. Inflation levels in India and abroad are poised to rise even higher in March, though temporarily, considering the impact of the Russia-Ukraine issue,” said Vinod Nair, Head of Research at Geojit Financial Services.

“Next week, the market will focus on the reduction of commodity prices and diplomatic development between Russia and Ukraine. If these global trends turn positive, the performance of the Indian market will be good or else it may get choppy."

The short term trends are negative, say technical analysts.

“The short-term trend still remains bearish on the charts and Nifty is facing strong selling pressure around 16,800 levels. The undertone of global indices continues to be bearish as well. Till Nifty decisively breaks above 16,800 levels, we suggest traders maintain a neutral to the mild bearish outlook,” said Yesha Shah, Head of Equity Research, Samco Securities.

In the first eleven days of March, foreign investors have already withdrawn Rs 41,168 crore from Indian equities. This is already more than they sold in February.

“The bulk of FPI flows to India are coming from emerging market funds. FPIs fear that India would be impacted more by the commodity price hike, particularly crude spike since India is a major crude importer,” said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

“FPI selling is mainly confined to financials and IT since these segments constitute the bulk of assets under the custody of FPIs. An important takeaway from FPI selling is that it is not impacting all segments."