Trading in the stock market is full of risks. Any trader can testify about this. On Friday 16 September, the Sensex and Nifty had fallen 2-2%. After this, there was a big fall in the market on Monday as well. There was a tremendous fall in the stock market on Monday. The Sensex closed at the level of 57,145.22, down 953 points or 1.64%. On the other hand, Nifty also managed to close at 17.016.30, falling 311.05 points i.e. 1.80% above the psychological level of 17000.
The issue was the US Fed meeting to be held last week, in which interest rates were expected to rise by 75 basis points. Then in the two-day session before the decision was actually due on Tuesday night, the indices made up almost all of the fall on Friday. The Nifty, which recorded a fall of 1.94% on Friday, had gained 1.6% on Monday and Tuesday. And on Tuesday night, the Dow Jones closed down more than 500 points after the Federal Reserve raised interest rates by 75 basis points. But when the Indian markets opened on Wednesday, they saw a slight decline. Although the markets closed down on Thursday, the closing of the Nifty was 20 points above its opening level. That is, overall, there was no effect of the Federal Reserve’s decision on the Nifty-Sensex.
Investors lost Rs 6.5 lakh crore on the first day of the week, stock market crashed for the fourth consecutive day
Last week’s Friday i.e. 23 September once again looked like a mirror image of last Friday. Nifty closed down 302 points, down nearly 1.7%. Once again this fall of Friday can be seen by linking it to the meeting of the Reserve Bank of India (RBI) to be held this week. After the meeting of the Federal Reserve, central banks all over the world have started raising interest rates for their countries.
While Bank of England has increased rates by 50 basis points, Swiss National Bank has increased rates by 75 basis points. America is already technically in recession. In June, the Federal Reserve projected US gross domestic product (GDP) growth at 1.7% for 2022, but has now lowered this estimate to 0.2%. Britain and the Eurozone are going to go into recession by the end of this year.
Although there is no fear of recession in India, but there is no doubt that the reduction in economic activity all over the world will have an impact on India’s economy as well. Nevertheless, the RBI has made it clear that inflation is the top priority for it at the moment and therefore there is every possibility that the RBI will hike interest rates further in its meeting this week. How much this increase will be, it can definitely be a surprise for the market. But the kind of move the market has shown after the Fed’s decision, it is difficult to make any predictions of bullish or bearish in the short term.
What are technical charts called?
Talking about the technical chart, if Nifty has broken the important support of 17430 on closing basis, then it is more likely that Nifty will not go above this level at least till the decision of Reserve Bank. In other words, this level will act as a resistance for the short term.
In the long term, Indian stock markets are on the way for a long bullish phase as India is the only economy in the world that will grow at a growth rate of more than 6% in the next 2-3 years. So investors across the world who had been shunned by the Indian stock markets over the past year will have little choice but to return.
There are signs of this as well. After selling for 16 consecutive months from April 2021 to July 2022, FIIs emerged as decisive buyers in August for the first time. September 2021 was an exception month in the middle, in which less than Rs 1000 crore was purchased by FIIs, but the figure for August 2022 is more than Rs 22000 crore. In September, though FIIs have done a net sell-off, the sell-off of just Rs 2446 crore is not much given the rapid rate at which the Federal Reserve and RBI have raised interest rates.
Technical View: Nifty defends the 17,000 level, expects a sharp pullback rally as it is in the oversold zone
But this does not mean that in the short to medium term, there is no crisis left in the Indian stock markets for traders and investors. According to the estimate presented by the Federal Reserve at last week’s meeting, interest rates in the US will reach 4.4% by the end of this year. By next year, it will reach a range of 4.75-5%, after which the Fed will finally start cutting interest rates. All these estimates will depend on how accurate the Fed’s estimate of inflation reduction is. Till the time the scenario is clear, the market will continue to fluctuate with negative bias.
Therefore, whether the intention is for investing or trading, experts are advising to bet only in stocks of fundamentally strong companies. Blow into the market, because caution is taken, accidents have happened.
(The author is an expert in agriculture and economic affairs)