A post-Budget rally in the offing? Sensex may follow the 3-year trend: Analysts

Indian stock markets today declined in line with global cues after the US Federal Reserve signalled to steadily tighten policy starting from March 2022. Global markets have been volatile amid hawkish US Fed and rising geopolitical tension. Indian markets are also facing the same pressure due to heavy Foreign Institutional Investors’ (FIIs) selling, as per analysts. 

“If we look at the Indian markets then there are lots of positive triggers that may help our market to outperform but we just need some calmness in global markets. The market is not going in the budget with any euphoria so there is a good chance of a post-budget rally and if we look at the last three years’ trend then the market corrects ahead of budget then it witnesses post-budget rally,” said Parth Nyati, Founder, Tradingo.

The S&P BSE Sensex dropped over 1.56% to 56,963, as trade resumed after a national holiday on Wednesday whereas Nifty index fell 1.54% to 17,012.95. The indices have suffered deep losses over the past week, erasing all the gains clocked this year.

Nifty is trying to find its feet near a strong support zone of 16850-16600 after a brutal fall. The market was looking much oversold as PCR was slipped below the 0.7 mark and FIIs’ long exposure in the index future dipped below 45% therefore a bounceback is due. Technically, 16800 is long-term trendline support and a previous demand zone while 200-DMA is placed around 16600 level therefore we can expect a pullback rally from here. On the upside, the 17500-17600 area will be the first resistance zone while above 17800, we will get confidence that the market has reversed and is ready to go higher.

Meanwhile, 10-year yield hit 25-month today after the Fed Chairman signalled it is ready to start tightening monetary policy to rein in inflation soon. The Indian rupee also fell to a one-month low against US dollar amid broad strength in the greenback.

“An increase in the 10-year bond yields of the US and the dollar index is seen as negative for emerging markets. Tensions between Russia and Ukraine have pushed up crude oil prices. With all these headwinds, the market today is facing a monthly expiration date for January FNO contracts, which has added to the volatility,” said Shrikant Chouhan, Head of Equity Research (Retail), Kotak Securities Ltd.

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