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The market is catching up with the reality that tight monetary policy is the only card on the table that will linger with high inflation. As a result, the global economy is bound to continue to slow, which will impact corporate earnings, as evidenced by the decline in US retail sales in the MoM. Valuations continue to trade on the slightly upside of long-term averages and FIIs continue in sell mode. Stocks trading at high valuations and sectors such as IT and metals are the most affected companies. In such a situation, the issue is capital preservation by investing in a balanced portfolio of equity, debt and cash. Markets saw frantic selling late in the trading session after a sharp fall in major European indices prompted investors to further trim positions. Rising interest rates to stem the risk of inflation and falling crude oil prices have investors worried the world could be heading for a major economic slowdown if demand falters. Markets plummeted on the weekly expiry day, losing over 2%, following weak global leads.
The benchmark initially opened on an uptrend in response to the US Federal Reserve's expected rate hike. However, it could not last long and gradually declined throughout the day. The market is somewhat in the oversold territory and the 15000 to 15200 zone could provide a temporary stay for the bears. For now, the 15600-15700 zone is seen as a daunting task for the bulls. Going forward, our market is likely to remain volatile in the short term, reflecting the movements of global competitors. Given the recent drop, it is prudent to avoid undue risk and keep positions small. Also, one must keep a close eye on geopolitical developments and avoid aggressive betting until the volatility is over. The collapse of the March low. 15,670 levels in Nifty on the weekly expiry day, added pressure further. Consequently, the Nifty index settled around the daily low and closed at 15360. All sector indices traded together and ended lower, with metals and media stocks being badly devastated. The broader indices also ended the sharp falls, losing in the 2.5-3.5% range. After catching temporary relief as markets rallied in the morning session, Niftys' gains evaporated as the benchmark fell hard and, most importantly, ended at its low for the day. In fact, the prospect of sizzling core inflation still worries the big Nifty bulls. With the Fed stepping up to raise rates faster, the street suspects the RBI may catch up with the hawkish Fed. After today's sharp drop, we suspect the bulls are struggling against the backdrop of a hawkish Fed and RBI, rising oil prices, inflation worries, growth fears and ongoing FII selling. Technically, the immediate support for Nifty can be seen at 15000 marks. Below 15,000 expect the Nifty to slide quickly towards the 14250 level. Markets are skeptical about how the global economy would achieve growth amid aggressive tightening. After the crucial dip below 15,650 at Nifty, the next major zone of support exists around the 14,800-15,000 zone. We think it's prudent to stay light and adjust positions accordingly until we see a decisive signal for a reversal.
Resistance: 15800, 16000, 16200
Support: 15600, 15400, 16200
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