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Markets next week; Amid banking turmoil, Fed and BoE policy to dictate sentiment

On Friday, Sensex closed at 57,989.90, up 355.06 points or 0.62%. Nifty 50 was up 114.45 points or 0.67% to finish at 17,100.05. Bank Nifty rose nearly 466 points, or 1.2%, while BSE Bankex rose more than 541 points, or 1.2%.

Domestic stocks started the week ending March 17 in the red on banks’ contagion fears following the collapses of Silicon Valley Bank and Signature Bank, but eased in the last two trading sessions as lenders like Credit Suisse and First Republic received some liquidity bailouts. the panic selling calmed down. Better-than-expected inflation data also contributed to a rebound in sentiment. However, the continued outflow of foreign funds dampened earnings.

Speaking of the current week’s performance, Vinod Nair, Head of Research at Geojit Financial Services, said: “Domestic indices followed suit in line with global markets which took a breather towards the end of the week in hopes of relief from the global banking turmoil Global stocks reversed their sell-off after reports of a bailout package for beleaguered First Republic Bank, along with a support to Swiss Central Bank’s Credit Suisse that would allay concerns about global financial stability.

Furthermore, Shrikant Chouhan, Head of Equity Research (Retail), Kotak Securities, emphasized that global equity markets reacted to the crisis in US and European banks. Indian markets were under pressure from these global developments. Accordingly, the major domestic benchmark indices Nifty-50 and Sensex-30 fell during the week. Broader indices, including BSE Midcap, BSE Small-cap, as well as most sector indices posted negative returns this week. In terms of the economy, India’s CPI inflation eased to 6.44% in February 2023 and the trade deficit remained contained by marginal increases (in January 2023) in exports and imports. Crude oil prices corrected sharply this week following the recent banking crisis. The yield on the 10-year US Treasury was lower than last week. Meanwhile, the European Central Bank raised interest rates by 50 basis points and continued its tightening policy measures.

This week, Sensex was down 1,145.23 points or 1.93% and Nifty 50 was down 312.85 points or 1.8%.

According to Ajit Mishra, VP – of Technical Research, Religare Broking, markets traded under pressure for the second straight week, losing nearly 2%, due to weak global signals. The tone was negative from the start, worsening further as the week progressed, but the rebound in the final session made up for some losses. The US banking crisis continued to take center stage and that kept participants on their toes. In addition, the continuous outflow of foreign funds added additional concerns. In the end, the benchmark indices, Nifty and Sensex, came in at 17,100.05 and 57,989.90 levels respectively. Meanwhile, the pressure was visible in all sectors with banking, finance, automotive and IT falling by 1%-4%. The broader indices also fell, losing more than 2% each.

What can you expect next week?

Nair said: “Declining inflation in the US gave confidence that the Fed would not opt ​​for a hard 50 basis point rate hike and would even consider taking a break at its March meeting. Continued adverse signals in global markets are encouraging investors to turn to safe havens such as the dollar and gold as FIIs pull money from the domestic market in response to the depreciation of the Indian rupee Given the ECB’s 50 basis point rate hike, all eyes will be on the US Fed and Bank of England, who are ready to hold their policy meetings next week.”

Also, Chouhan added, “market participants will be eagerly awaiting next week’s Federal Reserve policy decision.”

Mishra pointed out that in the absence of a major domestic event, the focus would be on the upcoming FOMC meeting scheduled for March 21-22. In addition, movement in crude oil and trend of foreign flows will also be central to signals. He added: “The markets may be taking a breather initially, but the upside seems limited as well. Nifty could run into hurdles around the 17,250-17,400 zone, while the 16,600-16,800 zone would provide the needed buffer, in case the situation continues to deteriorate.

Speaking to traders, Mishra said, “As we see a mixed trend across sectors, traders should continue with their stock-specific approach, with an emphasis on overnight risk management.”

Disclaimer: The views and recommendations made above are those of individual analysts or brokerage firms, and not of Mint. We recommend that investors consult certified experts before making investment decisions.

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