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Below is the Daily Market Quote 17 May  2022 By Milind Muchhala, Executive Director, Julius Baer India

''The Indian equity markets, in line with the global equity markets, seem to be in the midst of a perfect storm, displaying an extremely high level of volatility. The concerns that have been weighing on the markets since then start of the year related to inflationary pressure and tightening by the global central banks seem to have got exacerbated in the past couple of months, especially with the long-drawn geopolitical crisis and the fresh wave of Covid-19 in China, which have further disrupted the supply-chains. This is clearly reflected in the rising inflation prints (including in India), margin pressure in Q4FY22 results across sectors due to higher input and freight costs, and the cautious commentaries by various corporates for the near-term. There are increasing concerns building up on possibility of a Stagflationary scenario, which coupled with rising bond yields, does not augur well for Equities as an asset class. The rising dollar index (DXY) and the persistent selling by the FIIs are also not helping the cause. The risk-off environment, in fact, does not seem restricted to just equities, and we are seeing similar kinds of shake-outs even in EM currencies, cryptocurrencies and some commodities. We have been cautious on the markets for some time and we expect the uncertainty and volatility to continue in the near term. In fact, over the past few days, all intra-day recoveries are getting sold off, and various technical levels are getting broken, making the markets more nervous. The markets will continue to remain influenced by incremental news flows related to central bank actions, especially the US Fed, and inflationary trends. In the short-term, there could be some technical pull-backs in the markets, considering the excess pessimism that seems to be floating around and the oversold conditions that we are into. Even from the FIIs perspective, they seem to be holding one of the lowest net long positions in the recent times in the F&O segment, which can trigger some short covering in case the markets were to start moving up. However, we seem to be into a slightly long-drawn phase of consolidation for the markets with bouts of significant intermittent volatility''

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