Sensex and Nifty Predicted to Face Downward Pressure Amid Global Market Turbulence
In the early trading hours today, the Sensex and Nifty are set to experience a gap-down opening as the latest US Consumer Price Index (CPI) inflation data sends ripples through global markets. With US inflation rates surpassing expectations, investor sentiment worldwide has taken a cautious turn, impacting emerging markets, including India, unfavorably.
At the GIFT City International Financial Services Centre (IFSC), the Gift Nifty witnessed a sharp decline, dropping over 200 points to stand at 21,630. This downturn reflects broader market sentiment as investors weigh the potential implications of surging inflation and a strengthening dollar index on global economic stability.
Banking Sector Shows Resilience Amid Uncertainty
Despite overarching market pessimism, the Banking index Bank Nifty showcased robust performance, escalating by 1.4 percent or 620 points, to close at 45,502. Market analysts closely monitor pivotal levels, with Nifty finding immediate resistance at the 21,800-21,850 range, and support hovering around the 21,500 mark. Similarly, Bank Nifty's crucial support and resistance thresholds are identified at 45,002 and 45,588, respectively.
US Inflation and Its Global Repercussions
The recent US CPI data, showing a 3.1 percent annual increase and a 0.3 percent monthly upswing – rates exceeding analyst predictions – have substantially quelled hopes for an imminent Fed rate cut. This revelation stands in stark contrast to the previously tempered expectations set by Fed officials and the data, now painting a more resilient picture of inflationary pressures.
Consequently, the US 10-Year treasuries surged by 14 basis points to 4.31 percent, while the dollar index enjoyed a 0.6 percent uplift. These movements underscore the interconnected nature of global financial markets, as Asian stocks too mirrored the negativity, with Japan’s Nikkei 225 and Korea’s Kospi experiencing downturns.
Indian Markets: A Closer Look at the Immediate Future
In light of these developments, Indian stocks are braced for a challenging period. The local market has already been navigating through a slew of lackluster Q3 results, rendering it particularly vulnerable to external shocks. Amit Goel, Co-Founder and Chief Global Strategist at Pace 360, emphasized the "double whammy" effect for Indian stocks, attributing it to both domestic weaknesses and adverse global cues.
However, not all market watchers foresee a prolonged downturn. Siddharth Bhamre, Head of Research at Religare Broking, maintains a positive medium-term outlook for Indian markets, suggesting the current negativity may be short-lived. Similarly, Vikas Gupta, CEO & Chief Investment Strategist of Omniscience Capital, advocates a wait-and-see approach, pointing out that upcoming US data on private consumption and employment could offer further market direction.
Conclusion
As global markets react to the hotter-than-expected US inflation data, Indian stocks, particularly the Sensex and Nifty, face imminent headwinds. The banking sector, however, shows signs of resilience. Investors and market strategists alike remain vigilant, awaiting further economic indicators that could reshape the investment landscape in the days to come. With a keen eye on developments, the short-term outlook for the Indian market hinges on a delicate balance of internal strengths and external pressures.
Analyst comment
Negative news: The Sensex and Nifty are expected to face downward pressure due to global market turbulence caused by higher than expected US inflation rates. Indian stocks are vulnerable to external shocks, but some analysts believe the negativity may be short-lived. Market watchers are closely monitoring economic indicators to determine the future direction of the market.
