Markets to take a strong directional

The benchmark indices experienced profit-booking, resulting Sensex closing 456 points lower.

“The IT index declined by more than 2.5% while the media index rose over 1.5%. Technically Sensex has fallen below the 50-day SMA. It is advisable to reduce long positions or create short positions between,” says Shrikant Chouhan, Head Equity Research, Kotak Securities.

The global spotlight remains on the Federal Reserve's upcoming rate decision. Unexpectedly high US inflation figures for March have quelled expectations for a coordinated rate cut by major central banks in June.

Iran's president issues a stern warning against any Israeli invasion, while Dubai grapples with severe flooding due to record rainfall. President Biden's plan to increase tariffs on select Chinese goods aims to protect American manufacturers.

He added, “Despite Iran’s assault on Israel, oil prices decline to $82.85 a barrel, and India anticipates an above normal monsoon this year Adani's substantial investment in Ambuja Cements and the launch of Vodafone Idea's follow-on-public offer, potentially India's largest FPO, are notable business developments,” says Prashanth Tapse, Senior VP (Research), Mehta Equities.

The Iran-Israel tension in West Asia continues to weigh on stock markets globally. Until this uncertainty is out of the way, markets are unlikely to take a strong directional up move.

The hope is that the feared Israeli response will not lead to an escalated regional conflict. This is reflected in the 3% drop in crude price during the last two trading sessions.

“Meanwhile the market is coming to terms with higher-for-longer interest rate in the US since inflation continues to be sticky at lower levels. It seems that the market is reconciled to 2 rate cuts this year, that too backloaded,” says Dr. V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services

Since the US 10-year bond yield is hovering around 4.57%, more FII selling is likely, putting pressure on large-caps. This will provide opportunities to investors to slowly accumulate high quality largecaps where the margin of safety is high.

In the near-term, however, heightened activity is likely in mid and smallcaps, particularly in stocks where floating stocks are low. This is a risky area