With bears on driver’s seat, sustenance above 17,000-pts key for Nifty in March

Domestic equities have given negative returns for three consecutive months and have corrected almost 8%.

So, the picture for March isn’t anywhere closer to rosy given that uncertainties surrounding interest rate hikes and inflation persist, and foreign institutional investors are sitting on short positions.

Concerns are that rate hikes both in India and abroad are far from over as inflation remains hot. Moreover, the year-long war between Russia and Ukraine continues to keep geopolitical tensions high.

Therefore, analysts and market experts that ETMarkets spoke to, have mostly shied away from giving a particular level or target for the Nifty 50.

However, a majority of them have said that sustenance above the psychologically-important 17,000-level will be pivotal for the 50 stock index to see a trend reversal in the market.

“There is a mixed-bag outlook for the Nifty 50 in the short term…Hence, we are expecting Nifty to be range bound and could remain at the current level for the next 1 month,” said Vinit Bolinjkar, head of research at Ventura Securities.

At one end, higher valuation and lower-than-expected recovery in the domestic economy are negatively impacting market sentiments, while strong budgetary support and favourable economic policies are putting India in a sweet spot for FIIs, Bolinjkar said.

“Nifty has fallen to 17300 levels and going forward 17000 levels will act as a crucial support as below that it will slide further till 16700 levels. On the upside 17800/18000 now remains a crucial resistance, hence the range is 17000-18000,” said Jay Thakkar, VP and head of alternate research at Sharekhan by BNP Paribas.

If one was to guess how March would be for Dalal Street based on historical trends, then it could well be a month for the bulls.

In the last 12 years, Nifty 50 has given positive returns on 7 instances in March, data by Ace Equity showed.


Some analysts see scope for Nifty 50 to move upwards and settle closer to 17900 levels by the end of March.

“We expect the Nifty to be around 17900 by March end. Nifty has huge short positions at a weighted average of around 17800. We expect short covering only beyond this level,” said Manojh Vayalar, VP- Derivatives, Religare Broking.


Capital Flows
In the past few weeks, bond yields have risen sharply and so has the dollar index. This isn’t good news for the equity asset class from a capital flows perspective.

“The rising US 10-year yield has an implication on the dollar index which in turn sees more cash-based selling into Indian equities. FIIs sell in the cash market and buy some stock futures, so they use reverse arbitrage as a mode to sell in Indian equities,” Vayalar said.

Aamar Deo Singh, Head Advisory at Angel One too, expects FIIs to remain cautious in the near term.

“FPIs are expected to adopt a cautious approach in the short-term, given the global headwinds and lingering concerns regarding India’s growth..However, the overall outlook looks extremely promising and rewarding,” Singh said.

While FIIs are on a wait-and-watch mode, their trading activity in the month of March in the last 10 years offers a different picture.

FIIs were net buyers of Indian equities in 8 out of the last 11 years in March, data shows.


Even though there could be short-term hiccups because of a shift in flows to other emerging markets, the long-term picture for India remains upbeat, said experts.

“With Chinese markets proving to be unreliable, more and more FIIs are going to be allocating to the Indian markets,” Vikas Gupta, CEO and chief investment strategist at OmniScience Capital said.

(Data inputs from Ritesh Presswala)

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)