How do you see the stock market outlook for Wednesday 05th May 2022?

On Wednesday, Nifty cracked sharply and Sensex fell 1,307 points. This was on the back of the RBI decision to hike rates by 40 basis points from 4% to 4.40% and the CRR hike, which combined to take the markets by surprise. The Fed decision to hike rates by 50 bps was largely along expected lines, and was already pre-empted.

On Monday, the breadth of Nifty as measured by the advance decline ratio was obviously negative at 5:45. Among losing sectors, the financials and the rate sensitive stocks were the worst hit. The VIX also spiked by nearly 8% to 21.88 levels amidst rising fear in the markets after the RBI decision to make an unscheduled rate hike.

Foreign investors net sold equities to the tune of Rs.3,288 crore as domestic funds and LIC bought Rs.1,338 crore on Wednesday. QIB flows into LIC IPO will pick up next few days. In global markets, Dow gained 932 points while NASDAQ gained 401 points as taper was more moderate than expected. European markets were down more than 1% while SGX Nifty is 110 bps higher in early trades on Thursday.

The RBI has in a way pre-empted the Fed moves by hiking rates by 40 bps and stolen the thunder. However, one question is still unanswered. If the Fed continues to be aggressive on rate hikes, will the RBI also follow suit or continue to pre-empt. That will define how the markets will pan out. For now, you can still use rises to sell at this point of time.