By Rahul Shah
Markets took a breather after a ng time and volatility is in front seat again. Equity benchmark Index decline over 2% to close at below 22100 level, heading for the biggest decline since the week ended Oct. 29 on account of across the broad based selling in the market. However, there was bloodbath in the broader market after market regulator SEBI and AMFI.
A body representing the mutual fund industry, have directed fund houses to provide additional disclosures for small and mid-cap funds from this month. The additional disclosure parameters for mutual fund managers include valuation, volatility, investor concentration and stress tests. As a result, Nifty mid-cap and small cap Index nosedived 5% each. Nifty decline 470 points or 2.1% to close at 22023 against the previous week close.
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Others factors like hotter than expected US inflation data, rising US 10-year bond Yield to 4.28%, expectation of delay rate cut, and spike in oil price to a 4-month high above $85/bbl, dampening the market sentiment. Higher than expected US Feb Inflation data at 3.2% (expectation 3.1%) and PPI data at 0.6% (expectation 0.3%) a series of hot inflation readings pushed back expectations for when the Federal Reserve will cut interest rates.
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Next week Market Outlook
Next week will be important not only in the domestic market but also in the global market. US Fed interest rate decision will be announce on 20th March along with China, UK and Japan rate decision to be focus next week. Manufacturing PMI data likely to be release by India, US, Europe, Japan, China next week which implies economy growth outlook. Expectation of US Fed to keep unchanged interest rate at 5.50% but US Fed commentary will be important for the market sentiment.
Higher than expected US CPI and PPI data during the month of February are major concern that the US Fed to delay cut in interest rate . According to the report , that the 50-60% investors hope of US Fed to cut interest rate in the mid-year while previously were 80% expectation mid-year rate cut by Fed. As a result, US Dollar Index and 10-Year bond Yield surged to 1-month high at 103.5 and 4.30% respectively.
Domestic market outlook
This week most of the major indices like Nifty energy, mid-cap, small cap, infra, PSU Bank, realty and metal index decline between 5-9% after market regulator SEBI and AMF have directed fund houses to provide additional disclosures for small and mid-cap funds from this month.
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The additional disclosure parameters for mutual fund managers include valuation, volatility, investor concentration and stress tests. Strong domestic economy data, impressive quarterly results, stable inflation and exports clocked fastest growth in 20 months will be positive for the market for long term.
Major sectors to be focus
Small- and mid-cap stocks, which are more focused on the domestic market, showed decline sharply this week . Expect, stress test outcomes for these mutual funds are crucial as they will reveal how well these funds can manage sudden redemption pressures. Traders will be focus on high-quality large-cap and mid-cap stocks with fair valuations rather than riskier small-caps with inflated valuations.
Technical View
Nifty – Nifty formed a small bodied Bearish candle and an Inside Bar on daily scale and a Bearish candle on weekly frame which wiped away the gains of the last three weeks. Now it has to hold above 22000 zones, for a bounce towards 22222 then 22350 zones whereas supports are placed at 21850 and 21750 zones.
Stock of the week
HCL Tech : Buy CMP : 1647 Target : 1760 SL : 1620 Duration : 2-3 Days • HCL Tech has given falling channel breakout on daily chart and managed to close above the same. Buying is visible across IT Space which may support the ongoing up move. • It has formed a strong bullish candle on daily scale and supports are gradually shifting higher. Momentum indicator Relative Strength Index (RSI) has given bullish cross over which my take the prices higher.
(Rahul Shah, Senior Vice President, Group Advisory Leader-PCG, Broking & Distribution, Motilal Oswal Financial Services Ltd. Views expressed are the author’s own. Please consult your financial advisor before investing.)
