Market may not be able to shrug off volatility next week either

Indices ended this week keeping volatility levels high as the US market witnessed sell-off following the release of the FOMC meeting minutes where the Fed officials outlined plans for an interest rate hike and said that the unwinding of the bond portfolio could be aggressive.

From key meetings over the Russia-Ukraine border crisis to surging energy prices that may disturb India’s fiscal math to ongoing state elections to futures and options expiry — uncertainties are too many to predict a definite course of the market. Some of these are persistent issues and have been affecting markets for some time now.

“As current global cues are forcing global equities to remain unstable, the domestic market is also expected to continue its volatile trend in the coming days. In such a volatile market a prudent approach is to have a balanced portfolio with a mix of equity, debt, gold, and cash,” said Vinod Nair, Head of Research at Geojit Financial Services.

The earnings season, which just got over, was a mixed bag for Indian Inc. While most sectors saw revenue and profit growth, margins were down due to rising raw material prices for many companies.

With the earnings season behind us and given the overall tone, markets are expected to move in tandem with global peers in the coming week, Yesha Shah, Head of Equity Research, Samco Securities, agreed.

“Market players will keep a careful eye on developments in the Russia-Ukraine situation, and given the inflation overhang, they will also pay attention to movements in energy prices. Furthermore, given the ongoing assembly polls, political uncertainty will reign and hence, investors are recommended to remain on the sidelines until some level of stability is restored,” Shah added.

Another theme that has been consistent throughout this market consolidation is selling by foreign institutional investors. So far, they have withdrawn Rs 15,342 crore from Indian equities, the last updated data on NSDL shows.

The global macro trend is dominated by the expected monetary tightening by the Fed. When the rates and bond yields rise in the US, capital outflows from emerging markets may rise, said analysts.

“FIIs can be expected to sell more unless market corrections make valuations attractive. DIIs and HNIs are slowly accumulating high-quality financials whose valuations have turned attractive due to sustained FII selling,” said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

Ajit Mishra or Religare Broking recommends sticking to hedged positions and suggests preferring index majors over others. On the index front, Nifty needs a decisive close above 17,500 to regain strength while the 16,800-17,000 zone would remain the key support, he added.