Rising Inflation, Interest Rate and Volatility

Rising Inflation, Interest Rate and Volatility

Today, the market started trading positively and stayed volatile throughout the day before closing in the red. Concerns regarding rising interest rates and inflation are back and causing volatility swings. After yesterday’s confirmation by the RBI Governor, the rate hike in the next MPC meeting on June 6-8 is a done deal.

The government has taken fiscal and monetary measures to tame inflation. However, the actual effect of such a measure would be visible only in June or afterwards.

The Nifty 50 closed at 16,125.15, down 89.55 points or 0.55 per cent. It gave a bearish signal by making a lower high and a lower low compared to yesterday’s prices. Meanwhile, Nifty Bank stayed in the green and closed with marginal gains of 0.12 per cent.

The market breadth remained in favour of the decliners, and the advance-decline ratio was 0.36. The volatility index India Vix rose 9.56 per cent to 25.64. Going by the Rule of 16, such high volatility shows that the market can move about 1.6% in any direction in the next few trading sessions.

Nifty Market Action
Advancers – 573
Decliners – 1574
52Wk High – 19
52Wk Low – 75
High Band Hitters – 66
Low Band Hitters – 134
200d SMA – 17262
50d SMA – 16949
20d SMA – 16424

Nifty Top Gainers and Losers

Dr Reddy’s, HDFC, Kotak Bank, Power Grid and HDFC Bank were the top gainers, and Divi’s Lab, Tech Mahindra, Grasim, Hindustan Unilever and Hindalco were the top losers. 
View the list of all the Nifty 50 contributors.

Top Gainers

Top Losers

Nifty Sectors and Broader Indices

Except for auto, bank and financial services, all sectoral indices closed in the red. The metals continued to drag after the export duty levy on certain steel products.

Banks and the financial services sector were the gainers and the Auto sector was up marginally.

The broader market was also under pressure and closed in the red. Small-cap shares witnessed heavy selling. The Nifty Midcap 50 was down 0.47 per cent, and the Small-cap 50 was down 1.51 per cent.

Nifty Sectors – Notable Action
Financial Services +0.32%
Bank +0.12%
Auto +0.01
Media -2.57%
IT -1.88%
Health Care -1.54

Cracks because of Rising Inflation

Auto shares continued to gain on fuel price cuts, and the levy of export duty on steel and steel/metal stocks tumbled because of the levy of export duty. 
Shares of Ashok Leyland up +3.98%, TVS Motors up +1.86%, Tata Motors up +1.02%, M&M up +0.53%, and Hero Motors up +0.47%. Meanwhile, the shares of Tata Steel were down by -1.62%, JSW Steel down by -1.43%, and Jindal Steel down by -0.39%. Someone’s pain is someone else’s gain. As per initial estimates, the market expects steel prices to come down by 12 to 15 per cent because of export duty levy.

Daily Pivots

16050 to 16250 is the Nifty trading range for tomorrow. Rising Inflation, high volatility, low advance-decline ratio, more 52 wk low shares, and more low band hitters, all point to deep cracks in the broader market. Though, it is not visible in the marginal losses in the benchmark indices. There is no clear trend in the daily swings with high volatility. As noted in our weekly blog, currently, the market is only for traders with strong hearts.