Stock market news: Time consolidation awaits D-Street as global headwinds persist

The market remained sluggish throughout the week, with rate hikes and inflationary pressures continuing to be major drags. Theoretically, demand-side issues are addressed by the central bank through monetary policies, while supply-side issues are addressed through government fiscal measures. However, in the real world, when there is a crisis, its cascading effects are felt across borders, sectors and segments, and more often than not a combination of fiscal and monetary policies are implemented. .

Since the onset of the pandemic, RBI and the government have become brothers in arms, and their united efforts have continued even to combat the unprecedented inflation now witnessing. While it was widely expected that the RBI will hike rates and push the brakes, the government also stepped in and changed import duties to bolster the fight against inflation.

This is not the first time such a partnership has taken place.

In 2013, as inflation rates hovered in double digits, the RBI raised repo rates and the government imposed import restrictions on gold and metals. A similar coalition was also seen in 2018. After these two instances, the stock market rose by around 50% and around 20%, respectively, the following year.

So while history gives stock markets some hope, make no mistake, every time there has been a policy mix, the results have been positive. During the global financial crisis, countries that combined fiscal and monetary policy measures ended up with a sovereign debt crisis or high inflation later on.

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For example, the European Union faced a debt crisis in 2011 and as a result, the London Stock Exchange entered a brief bear market. Therefore, there is no magic formula for dealing with a financial crisis and success or failure depends on the dynamics of the situation.

Currently, India’s main focus has been to rein in inflation, but at the same time not aggressively hurt its growth and fiscal deficit. As a result, our stock markets have been relatively resilient so far. However, in the wake of ever-changing global macro-economies and the growing risk of a global recession, it is difficult to judge whether the combined efforts will bear positive results. In the midst of this uncertainty, it is highly likely that markets will continue to swing and that a temporal consolidation awaits us.

Technical outlook

Nifty 50 closed this week on a negative note, mostly in line with global stock indices. Currently, the Nifty seems to be heading towards the support zone between the 15,900 and 16,100 levels. the Nifty is now trading above the declining resistance line.

Given these factors, we suggest traders maintain a slightly negative to neutral outlook for the next week. As long as the Nifty does not drop below 15,900, there is still a good possibility for a move up to 16,800 levels.

Expectations of the week
The week ahead will be a roller coaster ride as a host of important events are set to be released. For starters, all eyeballs will be on the CPI and WPI inflation rates and markets will have a keen eye on whether import duty restrictions and rate hikes have had a positive impact. on the same.

Also, India’s trade balance data will be watched avidly as India’s trade deficit widened to a record high of $23.3 billion in May 2022.

Globally, the Fed’s interest rate decision may trigger concerns in global markets. Investors are therefore advised to be cautious and stay on the sidelines until a clear direction emerges in the market.

Nifty 50 closed the week at 16,201.80, down 2.31%.

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