What is your view for stock market trading for Friday 13th May 2022? How much longer you see correction continuing?

There was relenting on the market sell-off and it was another day of carnage in the stock markets on 12th May. With the Fed and the RBI promising to act tough on inflation, fears of more hawkishness from central banks and sustained supply chain constraints were the big concerns. Nifty is already down 15% from the peak, but NASDAQ is worse at 30%.

The breadth of the Nifty was unfavourable with an advance decline ratio or A/D ratio of 5:45 clearly showing which way the markets were swinging. Only the tech stocks showed some signs of positive movement on dollar strength. From the peak levels, the damage has been much deeper for mid-cap and small cap stocks as the VIX went up sharply to close near 25.

Foreign investors sold Rs.5,256 crore as domestic funds bought Rs.4,816 crore on Thursday. Equity plus debt selling by FPIs is over Rs.2.05 trillion since October 2021. In global markets, Dow was down 113 points and NASDAQ flat. Europe was down over 1% on average while SGX Nifty is trading positive with early gains of 109 bps, but this could change being Friday.

To answer your question on how much longer the correction will last, remember that macros are intimidating at this point. With US inflation at 8.3% and India inflation at 7.79%, there is little scope left for any dovishness. RBI has also joined the fray with 40 bps rate hike and expect more in the June policy. For Friday, there is the additional risk of weekend unwinding by the traders so it is best to be cautious in taking any trades.