Distributive policy

RBI credit policy will be crucial amid high inflation and rising global interest rates

Indian equity markets start FY23 on a high thanks to easing crude oil prices, positive news flows on the Russian-Ukrainian front, some FII buying, continued DII support and a resumption of industrial activities.

Global markets are stable. However, the geopolitical picture is still unclear amid fears of both high inflation and a slowdown as China grapples with COVID.

This week, RBI’s credit policy will be a critical factor in the direction of Indian markets as it looks like RBI is lagging the curve as most central banks have already hiked interest rates while RBI maintains the status quo. what. It will be interesting to see how RBI handles the trade-off between inflation and growth, where feedback will be crucial.

Historically, April remains one of the best months for equity markets where Midcap and Smallcap stocks tend to outperform. It will be important to see how FII performs in FY23 after relentless selling in the second half of FY22, but they switched gears last week with a decent buy of Rs5600Cr.

If we look at the derivative data, the April series starts off on a strong note as FII long exposure stands at 71% and the put call ratio sits at a comfortable 1.31. The Fear Index or the India Vix Volatility Index also fell below the 19 mark, but it has support near the 200-DMA around 17.5. If we look at the OI distribution chart, the editors seem confident at the 17,500 level while 18,000 appears to be immediate resistance.

Technically, the Nifty continues its strong bullish momentum after a break of the 17,350 level where 17,800 is immediate resistance while 18,000-18,100 is a critical resistance zone. On the downside, the 17,500-17,450 area will act as an immediate support zone while 17,100 is critical support to any sharp pullbacks.

Finally, Banknifty manages to clear the critical 36,700-37,000 resistance zone and shows strong momentum where 38,000 seems like an immediate target, but 37,400 is an intermediate hurdle. On the downside, the 36,700 level should now act as support while 36,000 is the next critical support level.

(Santosh Meena is Head of Research, Swastika Investmart Ltd.)

Published on: Saturday 02 April 2022, 17:47 IST