What is your stock market outlook for Nifty and Sensex for Friday 06th May 2022?

The stock markets saw huge volatility on Thursday amidst the pulls and pushes of monetary policy. During the day, the Nifty index touched a high of 16,945 levels but by close it had given up all its gains to close just 5 points higher at 16,683. Clearly, markets were not exactly pleased about the aggression in rate hikes indicated by the US Fed.

In terms of market structure, the breadth of Nifty remained negative on Thursday at the ratio of 19:31 advance to decline. The financials and the FMCG stocks were among the worst hit. The VIX fell 7% on Thursday but remained above the 20 mark, showing that markets were still volatile. The worry is that Fed and RBI may amplify rate hike effect.

Foreign investors were net sellers in equities to the tune of Rs.2,075 crore while the domestic funds and LIC bought stocks worth Rs.2,229 crore on Thursday, in a contrary trend that has been continuing for quite some time now. The LIC IPO has got just about 1 time subscribed with only employees and policy holders portion getting oversubscribed.

On Wednesday, Dow was down 1,063 points while NASDAQ tanked 648 points on deep fears that the rate hike trajectory could be substantially front ended by the Federal Reserve. European markets are down half a percent while the benchmark SGX Nifty is trading nearly 140 bps lower in early trades on Friday. Weekend pressure is likely to add up.

Friday could see the markets in a state of flux with the hawkishness continuing to play truant with market sentiments. It looks like the US is not relenting and they may only eventually worry if the US economy shows signs of slowing down. The ideal strategy would be selling the market on every rises and avoid buying on dips for the time being.