New Delhi Stocks posted modest gains over the past week, but volatility is expected to return as investors brace for higher rate hikes and fears of a slowdown weigh on developed economies.
Falling commodity prices and eased Covid restrictions in China buoyed market sentiment last week, even as weak data on new US and Indian taxes on auto fuels and domestic crude oil weighed on them. Nifty and Sensex ended the week just 0.34% higher than the previous close.
Deepak Jasani, Head of Retail Research, HDFC Securities Ltd, said: “Indian equity indices took the momentum of the last week and started strong.” However, global growth concerns, ongoing selling by foreign investors and the market remained volatile. According to Jasani taxation of raw products.
Experts said volatility is likely to continue and markets may remain limited. A rate hike by the US Federal Reserve is imminent and bond yields in the country continue to rise, leading to continued selling by foreign investors and putting pressure on the rupee.
Aishwarya Dadhich, fund manager at Ambit Asset Management, said the market could remain volatile in the near term as the US Federal Reserve hikes interest rates. The Fed is expected to hike 75 basis points in both July and August and the Reserve Bank of India is expected to hike rates at its next monetary policy meeting.
Analysts said recession fears may also be contained. Nishit Master, portfolio manager at Axis Securities, said that in the near term markets will be looking at the inflation trajectory and expected rate hikes by the Fed and European Central Bank, barring possible bearish signals in the US and Europe.
Dadhich said the market will also take a cue from the sharp drop in commodity prices around the world. The decrease in commodity prices is due to the expected downside risk in the developed markets. Dadhich said some market participants expect inflation to peak soon, which will keep the market in range bound mode in the coming months.
Siddharth Khemka, Head of Retail Research at Motilal Oswal Financial Services Ltd said: “Global headwinds remain a major overhang. Khemka said he expects the market to remain under pressure on the downside. Analysts said US manufacturing activity slowed in June, while construction spending softened unexpectedly.
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