Market expected to open flat as investors await US CPI data and Fed policy outcome

Domestic markets are expected to open flattish on Wednesday. Gift Nifty is ruling at 23 300 (700 am) against the Nifty futures value of 23,310. The US stocks closed on a mixed note, with the Nasdaq ending in the green even as the Dow closed in the red. Analysts expect the market to remain lacklustre until the Budget presentation.

Siddhartha Khemka, Head – of Retail Research, Motilal Oswal Financial Services Ltd, said: Overall, investors confidence got a boost post the key cabinet portfolios being retained with BJP, leading to notable activity in PSU stocks. However given the absence of any fresh trigger, the market seems to be in consolidation mode. Globally investors are cautiously awaiting US CPI data and US Fed policy outcome which will be released tomorrow. US Fed commentary could provide direction to the market. So far investors are baking in 1 rate cut towards the end of the year; so any deviation from that could drive the market on either side.

According to Ruchit Jain, Lead Research, 5paisa.com, FIIs have recently covered their short positions while the Client section has done some profit booking on long positions. The weekly options data indicates support around 23,200, followed by 23,000, while resistance is seen around 23,500.

For Kotak Institutional Equities, it is going to be Hobson’s choice for investors. “Fundamental investors may continue to struggle with the poor options ahead of them — stay invested or invest in a market, with increasingly tenuous links to fundamentals or exit the market in the hope of a more rational market, if and when it emerges. It is difficult to fight, gauge or preempt the ‘mob’ mentality in the market. “However, arguments of domestic institutional investors about investment compulsions seem convenient—(1) limited opportunity for domestic investors to invest in; money does not move across asset classes or stocks (excluding foreign flows) or (2) better tax-adjusted returns in equities versus other asset classes; this does not hold at all price points, obviously,” he added.

According to Yes Securities, Nonetheless, the election results were not the most favourable outcome the stock market had hoped for. “In this new scenario, a lower valuation multiple is necessary to account for coalition government risks and their impact on the reform trajectory. It is crucial for investors to focus on selecting reasonably priced stocks with high earnings visibility. This is not the time to pay high premiums for stocks or to buy solely based on the hope of future reforms,” it added.

Meanwhile, most Asian stocks are down in early trade on Wednesday.

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