Is the worst over for the markets?

Markets saw a strong recovery after the front-line Nifty 50 and S&P BSE Sensex indicators bottomed out on March 7. With indices rebounding 10 percent since March 7, what has changed in the past three weeks? The Ukraine war, which dampened investor sentiment, has not yet reached a peaceful solution.

However, US President Joe Biden’s largest-ever release of the US Strategic Petroleum Reserve has calmed oil markets from multi-year highs. Falling crude oil prices coupled with Russia’s offer of discounted crude oil at $35 a barrel to India is making markets worse for the worse. Regardless, analysts see fourth-quarter earnings included in FY22 help dampen investor sentiment. Much of the sell-off in India has been driven by massive sales to the manufacturing sector since October last year. However, analysts believe the worst FII outflows have peaked in Indian markets. Neeraj Chadawar of Axis Securities, for example, expects FII flows to resume in the next couple of months as valuations look favourable. In short, panic among investors appears to be subsiding, but the markets may not be completely out of the woods. Sentiment in the near to medium term will continue to remain volatile as the Ukraine-Russia crisis has not yet reached a final resolution and supply-deficient inflation has yet to peak. However, the path of the market this week will be guided by a combination of local and global economic data points. India will release March manufacturing PMI data on April 4th and services PMI data on April 6. Globally, the Eurozone, UK, USA and Russia are to release March Composite and Services PMI data on April 5th. Moreover, the Eurozone retail sales for March is due on April 7, and the Russian GDP data for the fourth quarter of FY22 will be released on April 8. Finally, the Reserve Bank of India will announce its rate decision on April 8. Shivam Bajaj of Avener Capital believes that the central bank will maintain the status quo and focus on growth at the upcoming MPC meeting.

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