Huge drop ahead for Nifty after searing US inflation data?

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Domestic inflation data for May, the US Fed’s interest rate decision and the behavior of the FII are the crucial factors that will dictate stock market conditions this week, analysts said. The movement of the rupiah against the US dollar and crude oil prices will also be on traders’ radar. India’s stock market benchmark Sensex fell more than 1,000 points on Friday as investors shunned risky assets amid fears that aggressive interest rate hikes by global central banks could stifle economic growth. On Friday, the Nifty ended down 1.68% at 16,201.

On Friday, US government data showed inflation hit 8.6% in the 12 months to May, the biggest rise in consumer prices since December 1981, due to soaring oil prices. energy and food, resulting in a massive sell-off on Wall Street. US inflation data was released after Indian markets closed.

Astute futures on the Singapore exchange are down at 16,048, showing a deep decline as Indian markets open on Monday.

Following the US inflation report, two-year US Treasury yields, which are highly sensitive to rate hikes, climbed to 3.057%, the highest since June 2008. Benchmark 10-year yields hit 3.178 %, the highest since May 9. The Dow Jones industrial average fell 880 points, or 2.73%, to 31,392.79 on Friday; the S&P 500 lost 116.96 points, or 2.91%, to 3,900.86; and the Nasdaq Composite lost 414.20 points, or 3.52%, to 11,340.02.

Additionally, on Friday, the rupee fell 19 paise to close at a new all-time low of 77.93 against the US dollar on Friday, as rising crude oil prices and continued outflows of foreign capital soured sentiment. . A sell-off in stock markets and a stronger greenback abroad also weighed on domestic unity, traders said.

On the domestic front, retail inflation will be announced on June 13 and wholesale inflation on June 14.

“All eyes will be on the U.S. FOMC (Federal Open Market Committee) decision scheduled for June 15, and the market fears aggressive rate hikes amid monster inflation. The Bank of Japan will also announce its credit policy on June 15. June 17. It will be crucial to see the behavior of FIIs amid the panic in global equity markets because they have been selling relentlessly over the past 8 months,” says Santosh Meena, Head of Research, Swastika Investmart Ltd.

Ajit Mishra, Vice President – Research, Religare Broking, says stock markets are once again reeling from huge pressure across the globe, citing lingering inflation that could prompt apex banks to act quickly.

“Indications point to prevailing negativity to continue, but bargain hunting at some index heavyweights could limit the damage. We expect Nifty to find support around the 15,650-15,900 levels while the 16,500 and 16,800 levels would act as strong hurdles on a rebound. Despite the prevailing negativity, autos, oil and gas stocks are doing well and should maintain the bias. On the other hand, metals and PSU banks can provide new opportunities to create shorts. We advise aligning positions accordingly and suggest preferring hedged bets,” he added.

National industrial production growth data released on Friday showed activity hit an eight-month high of 7.1% in April on the back of improved performance in the energy and mining sectors, according to government data released Friday.

“A 7.1% growth in industrial production on April 22 was strongly supported by a weak base during the severe second wave of COVID-19. However, the sequential decline reflects weak numbers. The strength seen in early high-frequency indicators such as the manufacturing PMI, GST collection, etc. is not yet reflected in industrial production. Categorically, with the exception of electricity, industrial production remained broadly sluggish in April 2022. The sequential decline in capital goods, which is a proxy for investment, is worrying. Additionally, the continued contraction in consumer durables adds to fears of weakening consumption growth amid rising prices, which requires policy attention,” said Vivek Rathi, Knight Research Director Frank India.

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