Expect market recovery in short term
The escalated geopolitical issues have led to spike in crude oil prices and VIX, which triggered volatility in the equity market leading the Nifty to breach the intermediate support of 16800.
We believe crude trajectory will key to watch, going ahead. Amid the sharp rise of Brent crude breaching US$100/barrel levels, the economic growth trajectory faces a risk amid rate hike cycle around the corner. Therefore, we do not expect any major sanctions by US/Europe, as it could have wider economic ramification for them too. The stabilisation of crude or relatively milder sanction, in our view, will be key driver for global equities recovery in the short-term. On economic perspective, we believe risk of higher dependency for utilities/trade on one country is now on the forefront, and thus “Plus one” policy push will accelerate globally, largely benefitting economies such as India, which is in a sweet spot amid PLI and other initiatives by the government.
On the technical front, going ahead, we believe strong support for the Nifty is placed at 15800 as it is confluence of a) the breakdown implication of past four weeks’ consolidation (17995-16810) at ~15800 and b) 61.8% retracement of April-October rally (14150-18600) around 15800. Most importantly, past four month's 12% correction from lifetime high of 18600 has pushed weekly stochastic oscillator in oversold territory, indicating possibility of impending pullback in coming weeks cannot be ruled out. However, for a meaningful pullback to materialise, the index needs to form a higher high-low (on a closing basis).
Fundamentally, medium to long term constructive thesis on Indian equities remain intact amid economic recovery as reflected by key macroeconomic indicators, strong capex spends and robust corporate earnings (Nifty earnings growth likely at 21.5 % CAGR over FY21-24). We continue to see this correction as an opportunity for the investors to add on the companies with sustainable growth visibility.
Disclaimer – I ICICI Securities Ltd. ( I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Venture House, Appasaheb Marathe Marg, Prabhadevi, Mumbai - 400 025, India, Tel No : 022 - 6807 7100. I-Sec is acting as a distributor to solicit bond related products. All disputes with respect to the distribution activity, would not have access to Exchange investor redressal forum or Arbitration mechanism. The contents herein above shall not be considered as an invitation or persuasion to trade or invest. I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon. Investments in securities market are subject to market risks, read all the related documents carefully before investing. The contents herein mentioned are solely for informational and educational purpose.