Volatility posing risk to Indian markets

New Delhi: Volatility is expected to remain elevated in the short term, given the upside risk of domestic inflation on account of higher crude prices, said Vinod Nair, head (research) at Geojit Financial Services.

Investors are closely monitoring releases of domestic, US, and Chinese PMI data, among other indicators, as they are expected to shape future market trends, he said. Amid mounting concerns stemming from escalating crude oil prices and inflationary pressures, which were compounded by fears of another rate hike by the Fed, the domestic market grappled with volatility throughout the week, he said.

The increase in US bond yields and volatility in the INR further diminished the attractiveness of domestic indices for foreign investors. Further, due to low liquidity and a lack of catalysts to stimulate buying, the market is encountering strong resistance at higher levels.

Throughout the week, IT stocks underperformed due to adverse global cues, while the pharma sector witnessed strong buying interest as investors adopted a defensive strategy in response to global uncertainties. Yet the market concluded the week on a positive note, boosted by healthy momentum in industrial growth, up by 12 per cent YoY, he said.

Siddhartha Khemka, head (retail research), Motilal Oswal Financial Services, said: “Overall we expect the market to trade in a broader range as the higher oil price has rekindled the worry over inflation and might result in a prolonged high interest rate environment. Investors will also take cues from macro data to be released globally.” Auto stocks will remain in focus as companies will announce monthly sales numbers. Interest rate sensitive sector would also be in focus, as RBI policy meeting is scheduled this week.