Indian equity markets kicked off Tuesday's trading session on a negative note, with both key benchmark indices slipping into the red. The BSE Sensex witnessed a sharp decline, while the Nifty50 struggled to hold ground above a crucial level.
Market Opening: A Weak Start
At the opening bell, the indices showed a green tint but quickly reversed gains. By 9:25 AM, the Nifty50 was trading at 26,193.10, marking a fall of 57 points or 0.22%. The BSE Sensex was positioned at 85,140.05, reflecting a more pronounced drop of 300 points or 0.35%.
Analysts' View: Positive Bias with a Caveat
Market experts maintain a cautiously optimistic outlook for Indian equities in the near term. This sentiment is primarily driven by stronger-than-expected third-quarter corporate earnings and rising hopes for significant capital expenditure announcements in the upcoming Union Budget. These domestic factors are seen as key pillars of support.
However, analysts unanimously warn investors to brace for potential volatility. The primary risk stems from ongoing geopolitical developments worldwide, which can trigger sudden market swings. Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, commented on the complex global scenario.
"The US markets have largely ignored the Venezuelan crisis and moved ahead," he noted. "The market's verdict appears to be that the economic fallout from this major event may not be negative; it could even turn positive in the medium to long term if crude oil prices fall due to increased supply from Venezuela."
He added a strong note of caution, stating, "However, it is too early to conclude, as further geopolitical surprises are likely. We are in a phase of high uncertainty. Hence, investors could consider increasing the cash portion in their portfolios while staying invested. Heightened uncertainty from unprecedented events demands a cautious investment approach, supported by higher cash reserves to capitalize on sudden market movements."
Dr. Vijayakumar also pointed out that the banking sector is gaining strength, backed by rising credit growth, even as attracting deposits continues to be a challenge.
Global and Domestic Cues
Global market signals were mixed but largely supportive. On Monday, Wall Street closed higher, with the Dow Jones Industrial Average hitting a fresh record peak. Gains in financial and energy stocks propelled the rally, the latter boosted by US military action involving Venezuelan President Nicolas Maduro.
Following this lead, Asian markets opened with marginal gains on Tuesday, continuing the global equity rally as investors temporarily looked past geopolitical risks. In currency markets, the US dollar held near a two-week high in early Asian trade, supported by receding immediate anxiety and dovish comments from Federal Reserve officials.
On the domestic institutional front, data revealed a divergent trend. On Monday, foreign portfolio investors (FPIs) were net sellers, offloading Indian equities worth Rs 36 crore. In contrast, domestic institutional investors (DIIs) provided robust support, making net purchases worth Rs 1,764 crore, cushioning the market from a steeper fall.
Disclaimer: The recommendations and views expressed by investment experts are their own and do not represent the views of this publication.
