Stock market participants expect a further downside pressure in the immediate future. Analysts believe there is not much price correction left now. But in terms of time, the bear phase will continue for at least a year.
The market is expected to take a cue from a testimony by US Fed chairman Ben Bernanke. He said the weakening in the US dollar is adding to the oil prices. Bernanke also said inflation outlook unusually uncertain. Brokers and analysts see the next support level for Sensex at around 12,400 points, and for S&P CNX Nifty at 3600 points. Stocks that are sensitive to interest rates — such as banks, automobiles, and real estate — will continue to exert downward pressure in the market, apart from capital goods sector that will take a hit as the economy slows down.
Investors and brokers are also waiting for the outcome of the vote of confidence to be sought by the UPA government this month. Till July 22, the political uncertainly will hold the market down, said TS Harihar of I-Sec. He believes the corporate earning numbers, global crude oil prices and inflation will be the major factors that will decide the course of the market in the coming days.
Many brokers believe the US Federal Reserve?s move to back Freddie Mac and Fannie Mae, the two largest home loan buyers in US, will not have much impact on the Indian market. ?This was more or less expected,? said Harihar.
“All the macro-economic figures are in, and portray a not-so-happy picture. Now we will see its impact on stocks in capital goods and banking sectors,” said Ketan Malkan, vice president at Indiainfoline. Analysts see investors taking more and more positions in defensive stocks like IT, FMCG and telecom. “Telecom is less co-related to economic growth figures. With 3G coming up, telecom seems to hold ground,” said a broker. IT stocks have already taken hit, but the guidance issued by companies may act as a basis for investors.
FMCG stocks have already been corrected, and now investors may freshly look at them as defensive stocks, said a broker. The borrowing cost for real estate sector has gone up. As for banks, credit growth has slowed down while deposit rates and going up.