InvestorQ : How do you see the stock markets on Thursday, the 20th of October 2022?
Sam Eswaran made post

How do you see the stock markets on Thursday, the 20th of October 2022?

diksha shah answered.
1 month ago

On Wednesday, the 19th of October, the Nifty opened strong but gave up most of the gains in the second half as unwinding pressure built up in the markets. For now the Nifty has held the 17,500 levels but these things can change at short notice. The undertone still remains buy on dips but the Nifty closed the day with just 25 points gains. It has also held up just above 17,500 levels after touching the 17,600 levels during the day.

The breadth of market as indicated by the advanced decline ratio or the A/D ratio saw a lot of damage in the day to close at 18:32. That is rather disappointing after the robust start and you can largely blame that on the rupee which got pretty close to the 83/$ levels. In terms of sectoral mix of the market, the FMCG had a positive day but banks and metals came under pressure. The pressure worsened in the second half after the rupee edged close to the mark of 83/$ on worries that the US would stay its hawkish course for more time.

After the encouraging month of August and the disappointment in the second month of September 2022, the month of October saw consistent selling, albeit to a more controlled extent. For instance, foreign portfolio investors were net sellers in equities to the tune of Rs.454 crore while the domestic funds and LIC bought stocks worth Rs.908 crore on Wednesday. Incidentally, this FPI selling on Wednesday also marked the ninth consecutive day of selling by the FPIs in the month of October 2022; and that is not great news.

On Wednesday late trades, the Dow Jones Industrial Average (DJIA) was down 229 points while the tech laden NASDAQ was down 156 points. This was after the stocks retreated after a minor bounce in markets. While Europe remained marginally in the negative, the SGX Nifty, the early morning benchmark for the Indian Nifty, is trading below 17,400 in early trades. That indicates a weak start on Thursday and a struggle to hold on to higher levels.

If I was to summarize the one real metrics to watch out for next few days it would be the rupee value. On Wednesday, the rupee plunged beyond the 83/$ mark very briefly and closed precarious at the level of 82.98/$. It does not look like the level of 83 can also be held for too long as the RBI is also reluctant to intervene beyond a point. The fall post 80/$ has been sharp and the ruthless and the RBI has been more measured in its intervention. That is due to the spill over effects that intervention has on the forex reserve position of the RBI, the domestic liquidity situation and forward premiums as hinted by interest rate differentials.