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Published on 15/02/2022 8:54:20 AM | Source: Accord Fintech

Markets likely to open on positive note after huge sell-off

Posted in Market Outlook| #Market Outlook

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Indian markets closed three percent lower on Monday, as escalating tensions between Russia and the West over Ukraine worried investors globally. It was the biggest single-day fall for the Indian market since April 2021. Today, markets are likely to open on a positive note after a huge selloff the previous day amid mixed cues from Asian peers. Some support will come as in an effort to tame food inflation, the government has reduced import duty on lentils to nil for Australia and Canada origins and cut it to 22%, from 30%, for those originating in the US. Traders may take note of that Finance Minister Nirmala Sitharaman said discussions with regard to private cryptocurrencies and central bank-backed digital currency have been going on with the Reserve Bank and a decision will be taken after due deliberations. Besides, a private report stated that the Production Linked Incentives Scheme for the automobile and auto components sector will lead to creation of 7.5 lakh additional jobs and incremental production worth Rs 2,31,500 crore over the next five years. However, the markets may see bouts of volatility amid the Russia-Ukraine conflict and rising oil prices. Traders may be concerned as retail inflation soared to a seven-month high of 6.01 per cent in January, breaching the upper tolerance level of the Reserve Bank, driven by rising prices certain food items. The inflation in the food basket was 5.43 per cent in January 2022 as against 4.05 per cent in the preceding month. Data released by the government showed that the retail inflation in ‘oils and fats’ category stood at 18.7 per cent. Meanwhile, India and the UAE are likely to sign a free trade agreement (FTA) on February 18, under which both the countries could give duty-free access to a number of products from different sectors. Coal industry stocks will be in focus as the government said India's coal output registered an increase of 6.13 per cent to 79.60 million tonnes in January. India's coal output stood at 75 million tonnes (MT) in January 2020. There will be some reaction in edible oil industry stocks as industry body Solvent Extractors Association (SEA) said India's palm oil imports declined by 29.15 per cent to 5,53,084 tonnes during January this year, but there was a sharp rise in shipments of RBD palmolein affecting domestic refineries. India, the world's leading vegetable oil buyer, imported 7,80,741 tonnes of palm oils in January 2021.

The US markets ended lower on Monday after the US Secretary of State Antony Blinken announced the relocation of U.S. diplomatic operations to western Ukraine, in a possible sign of an imminent Russian invasion. Asian markets are trading mixed on Tuesday as traders parsed geopolitical risks, worries about Federal Reserve policy tightening and steps by China’s central bank to support growth.

 

Back home, Indian equity benchmarks plunged sharply on Monday, extending fall to the second straight session. The markets crash was mainly induced by heavy global sell off fuelled by escalating tensions between Russia and the West over Ukraine. Key indices made gap-down opening and stayed in red for whole day as India’s industrial production growth slowed down for a fourth straight month in December to 0.4 per cent mainly due to a poor performance by the manufacturing sector. According to the data released by the National Statistical Office (NSO), the manufacturing sector, which constitutes 77.63 per cent of the Index of Industrial Production (IIP), contracted by 0.1 per cent in December. During the afternoon session, markets further fell as wholesale inflation across the country rose to 12.96 per cent in January, which was higher than expectation.  The wholesale price index (WPI) grew 13.56 per cent during the month of December 2021, while the WPI for November last year was revised to 14.87 per cent from 14.23 per cent. The WPI in January 2021 was at 2.51 per cent. Some concern also came as data from depositories indicated that foreign portfolio investors (FPIs) have withdrawn a net Rs 14,935 crore from the Indian market in the first half of February. FPIs have been net sellers for the fourth consecutive month. As per data, FPIs took out Rs 10,080 crore from equities, Rs 4,830 crore from the debt segment and Rs 24 crore from hybrid instruments. Traders remained on sidelines ahead of CPI inflation data scheduled for Feb 14. Finally, the BSE Sensex fell 1747.08 points or 3.00% to 56,405.84 and the CNX Nifty was down by 531.95 points or 3.06% to 16,842.80.

 

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