As India’s equity markets recover from a sturdy weekly close, investors are now at greater risk. Geopolitical tensions, withdrawal of foreign institutional investors (FII), and the upcoming earnings season present challenging tests, which can result in volatility in the days to come. Post Indo Pak Dispute, The risk of Indian markets has been expected to be increased to almost three times as of now.
With geopolitical concerns, volatile FII flows, and significant ear nings releases in sight, Indian markets are set for a period of increased uncertainty. Investors will have to be cautious and closely watch events to survive the turbulence over the coming days.
The recent militant strike in Kashmir has brought back the demands for war against Pakistan, like in the response to the 2019 event. With the nuclear-armed neighbors on the warpath, investors are growing more risk-averse about what spillovers there might be on market stability. Political tensions do support risk-averse trading, and whatever news is available on this dimension can contribute meaningfully to investor sentiment.
Foreign institutional investors (FIIs) have been major market drivers of the recent trend. Having sold shares aggressively during the first half of the year, shedding ₹1.22 lakh crore of equity, FIIs recently shifted gear to become net buyers, injecting ₹32,466 crore into Indian equities in eight days of trading. This was facilitated by a weak US dollar and global tariff realignment.
However, Friday witnessed FII going into selling mode, withdrawing ₹2,952 crore, as the domestic institutional players (DIIs) came and bought ₹3,539 crore. With a couple of days left for the month of April, more action from FII will decide. Whether India ends three months of selling.
More than 180 firms, including key banking, energy, cement, and retail firms, will declare their quarterly numbers this week. Investors will scrutinize reports to assess business performance in the wake of macroeconomic uncertainty across the world. Results of earnings from industry leaders have the potential to influence the movement of benchmark indices and sectoral trends.
The Nifty fell 0.86% on Friday to close at 24,039.35 and ended a two-day losing streak. The technicals indicate that the index has fallen below its 200-day moving average, and if it does not cross 24,365, it can remain in the range of 23,500-24,350.
Rupee depreciating to an all-time low level of 85.45. Relative to the US currency is another source of apprehension with investors. Any increase in tensions on the geopolitical front can again add to the pressure on currency markets that can affect FII flows and overall economic stability.
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