‘Markets may face volatility amid derivatives expiry’

A SLOWDOWN IN THE GLOBAL ECONOMY AND INFLATION MEANS STAGFLATION IS A KEY CONCERN FOR EQUITY MARKETS

NEW DELHI: Global factors and trading activity of foreign institutional investors are expected to guide domestic market sentiments this week, while equity benchmarks may face volatility amid monthly derivatives expiry, analysts said.

Indian markets have been witnessing volatile trades for the past several trading sessions. However, the Nifty managed to break its five-week losing streak and ended with a decent weekly gain of 3%, said Santosh Meena, head of research, Swastika Investmart Ltd.

Inflation and slowdown in the global economy means stagflation is a key concern for the global equity markets, “therefore, we are seeing relentless selling by FIIs (foreign institutional investors). However, Indian markets are in a better position because of support from domestic investors”, he said.

“The market may remain volatile this week because of May month expiry. On the global front, minutes of the Federal Open Market Committee (FOMC) meeting will be released on May 25, which will be an important trigger, while movement of the dollar index and commodity prices will be other important factors,” Meena said.

Yesha Shah, head of equity research, Samco Securities, said, “The volatility observed last week is expected to continue considering major economic data releases, the current earnings season and the monthly expiry. The FOMC minutes, US gross domestic product growth rate forecasts and initial jobless claims will all influence global market sentiment.” Last week, the Sensex climbed 1,532.77 points or 2.90%, while the Nifty jumped 484 points or 3.06%.

“Overall we expect this volatility to continue this week as well with several macro headwinds like high inflation and aggressive interest rate hike. Also heavy FII selling continued, which added to the overall pressure in the market,” said Siddhartha Khemka, head, retail research, Motilal Oswal Financial Services Ltd.

SAIL, Zomato, Adani Ports, Deepak Fertilizers, InterGlobe Aviation, Hindalco, NMDC, GAIL and Godrej Industries would announce their quarterly numbers this week.

Ajit Mishra, vice-president, research, Religare Broking Ltd, said, “Global cues, the last leg of earnings and updates on the Russia-Ukraine war will be on the radar.”

Exodus of foreign money from the Indian equity markets continues unabated with foreign portfolio investors (FPIs) pulling out more than ₹35,000 crore so far this month on concerns over the prospects of more aggressive rate hike by US Federal Reserve and appreciation of the dollar. Net outflow by FPIs from equities reached ₹1.63 lakh crore so far in 2022. FPIs flow in India is to remain volatile in the near term