Trekking through the markets
Indian Equity markets: Fed cooled down the cyclical trade, defensives come to the fore
US Federal Reserve put a brake on the cyclical trade as global commodity prices continue to correct sharply. The market was supported by the defensives (FMCG and IT). The level of activity remained very high; the market breadth was poor; and volatility inched higher. Besides, commodities, reality and PSU banks were worst performing sectors. Midcaps did the worst. Bond yields were stable, while INRUSD weakened sharply.
Global market: Fed hits the risk trade, commodities tumble on stronger USD
US Federal Reserve indicated that the growth continue to remain strong and the near zero rate regime may end in 2023. The USD strengthened on Fed optimism on economy, yield curve flattened, sending the commodity markets into turmoil. Equities followed the commodities. The concerns of 3rd wave of pandemic unfolding in UK also added to the risk aversion. Volatility jumped sharply higher. Precious metals also tumbled with Gold recording one of the worst week in 3 years. Crude ended the week marginally higher.
Outlook for the week
The market trend and outlook remain unchanged from last week. Nifty outlook and trend are neutral (implying balanced risk reward) for near term (daily), short term (weekly) and midterm (monthly). Bank Nifty trend and outlook is now positive for near term (daily), short term (weekly) and midterm (monthly). The momentum however remains high, indicating that markets continue to remain susceptible to sudden changes in trend and outlook, so trade has to be with strict stop losses. For this week-.
· The day traders may avoid trading in 15595-15655 nifty range, as in this range volatility may be high and stop losses on both sides may get hit. The long positions may be held with a stop loss of 15125 (on daily closing basis). Non positional short positions may be held with a stop loss of 15835 (on daily closing basis).
· For Bank Nifty also day Trading may be avoided in 34360 – 34730 range. For all long position maintain a strict stop loss of 34110 (on closing basis). Non positional short positions may be held with a stop loss of 35460 (on closing basis).
Market trend and outlook
Indian markets last week
Global market performance last week