What is your view on the stock markets for Monday 16th May, 2022? After such a rapid correction, do you see a bounce?

There was little respite on Monday and it market another day of sharp correction in the markets, although the fall was more subdued. However, most metal stocks took a hit amidst fears of more hawkishness from central banks and sustained supply chain constraints facing manufacturers. Nifty is down 16% from the peak.

The breadth of Nifty was unfavourable at 5:45 with some respite only from auto stocks and FMCG stocks. During Friday, the VIX tapered to the 23.65 levels. On institutional flows, the foreign investors sold equities to the tune of Rs.3780 crore while domestic investors bought equities to the tune of Rs3,170 crore. FPIs sold over Rs2.10 trillion in last 7 months overall.

Let us also look at the global markets scenario. On Friday, the Dow was up 466 points while NASDAQ closed up by 434 points; a sharp rally in the US markets overall. European markets were up over 2.5% on average while SGX Nifty is trading positive with gains of 35-40 bps in early trades. The US market optimism is likely to rub off on the Indian markets too.

Let me address your query on whether markets can bounce. The indices are hinting at being in an oversold zone so there could be a bounce from these levels. However, till there is a cloud over macros, markets will favour selling at higher level. For now, traders can use bounces to sell the market or sell higher strike call options on the Nifty as a safe route.