What is your view on the stock market outlook for Thursday 12th May 2022? Will we see the markets finally bottoming out?

In the last few days, the overhang of global hawkishness and rising inflation has kept Indian markets on tenterhooks as the Nifty corrected more than 14% from the peak levels of over 16,600. On 11th May, US inflation was announced at 8.3%; which is higher than Reuters estimates. Indian inflation and IIP are expected to be announced on 12th May.

In terms of market structure, the breadth of the Nifty was unfavourable at 22:28 with only the financials and oil holding up strongly. The power of oil stocks is evident from the fact that Saudi Aramco has beaten Apple to become the most valuable company in the world today and it is literally this commodity that is at the centre of macros.

Foreign investors were net sellers of Rs.3,609 crore and domestic funds bought Rs.4,181 crore of stocks on Wednesday. If you add equity and debt, net FPI selling has crossed Rs.2 trillion since October 2021. On Wednesday, Dow fell 326 points and NASDAQ tanked 373 points. NASDAQ is now down 30% from its peak. SGX Nifty is trades 110 bps lower.

The big data point for Indian markets will be the inflation announcement. RBI has already hinted that it is all set to hike rates further if inflation is seen getting out of control. Investors need to cautious on this market for now. Lower prices may appear to be visually attractive but this market is not just about P/E ratios alone. It is about how too many negatives are combining to rethink the idea of valuations. Time to be cautious.