What is your stock market view for Wednesday, 16th of March, ahead of the Fed meet outcome? Do you see a bounce coming again in the Nifty?

On Tuesday, the market saw deep cuts after 5 days of continuous gains. Nifty corrected sharply by 208 points and the Sensex fell 710 points as markets remained cautious ahead of the critical Fed meet. Fed is expected to start its rate hike process from Mar-22. Also, the spike in CPI and WPI inflation in India in Feb-22 worked against the markets.

In terms of market internals, the breadth of market was negative with an advance decline ratio or A/D ratio unfavourable at 14:36 levels. However, VIX went up sharply to 26.73 levels, showing some amount of panic. To a large extent, inflation also played a role, but the fall in Brent crude closer to the $100/bbl levels should act as a positive trigger.

Let me now turn to the FPI flows. FPIs net sold Rs.1,250 crore in equities while domestic funds and LIC bought Rs.98 crore on Tuesday. FPI selling has surely been tapering. Among global markets, Dow bounced 599 points while NASDAQ was up 367 points. Meanwhile Europe was flat to negative while SGX Nifty is nearly 145 bps higher in early trades.

This may not be the right time for any aggressive buying as this is a truncated week and also there is the all-important Fed statement slated to come out on Wednesday evening. It is best to take a fresh view based on how hawkish the Fed actually gets. A hike of 25 bps is par for the course, but markets would be disappointed with a 50 bps rate hike.