Rate hike anxiety casting a shadow on markets

The stock markets of all stripes are facing a reckoning. Decades-high inflation is roiling economies across the globe, and investors are wondering if central banks might act too aggressively to fight it and end up tipping the global economy into recession. For the week ended, Indian markets ended lower for the third consecutive week and also posted their biggest weekly loss since May 2020. BSE Sensex shed 2,943.02 points (5.41 percent) to close at 51,360.42, while NSE Nifty declined 908.3 points (5.6 percent) to end at 15,293.50 points. Following the benchmark indices, the BSE Midcap index and Smallcap index slipped 5.3 percent and 6.6 percent respectively. All sectoral indices ended in the red. Sharp fall in small-cap and mid-cap stocks during the week ended was a factor for increasing panic among retail investors. The week also saw the rolling 12-month returns of Nifty, Nifty Midcap 100 and Nifty 500 indexes, a key barometer of retail investment decisions, turn negative for the first time. FIIs continued selling, offloading equities worth Rs23,273.67 crore, while DIIs bought shares worth Rs17,226.16 crore. FIIs have sold net Rs42,088.63 crore in June, till date.

The Indian rupee continued to weaken against the US dollar. The Indian currency closed 23 paise down at 78.07 per dollar on June 17 against its June 10 closing of 77.84. The progress of the South-West monsoon has been disappointing so far with deficit of more than 25 per cent in many agriculture-heavy regions of the country shaking investor confidence in the economy as well as fan concerns over inflation remaining higher for a longer period of time. The once-hot crypto market also had a crazy week, reinforcing investors' concerns that there is nowhere to hide from the current market turmoil. One of the largest crypto lending platforms, Celsius Network LLC, told customers on Sunday it was pausing all withdrawals. The anxiety spread quickly throughout the sector all week. Prospects for repeated interest rate rises throughout the rest of the year have lent to fears that rapid tightening could reduce growth. Despite higher tax collections suggesting robustness of economy; heightened geo-political tensions, high inflation and RBI policy normalization will keep a lid on market performance. Expect higher than usual volatility in the short term. Notwithstanding the short-term global risks and assuming that the geo-political tensions are diffused soon, savvy old timers remain optimistic on a reasonable domestic recovery.

Listening Post: The Crypto Party Is Over. The cryptocurrency industry was built on swagger, enthusiasm and optimism. All three are in short supply these days, as losses and layoffs mount. Now, with markets sliding and inflation plaguing the global economy, cryptocurrencies have been among the first assets sold. Since bitcoin hit an all-time high in November, roughly $2 trillion of cryptocurrency value—more than two-thirds of all the crypto that existed—has been erased. Crypto exchanges are bleeding users, crypto companies are laying off workers with at least one contemplating restructuring. The crypto world is no stranger to booms and busts, which many in the industry refer to as 'winters.' But many investors and workers are feeling this crypto crash more acutely than previous ones. When the dust settles, some crypto products and companies may no longer exist. The reality is that like stock, with crypto, everyone is a genius in a bull market. Now, that prices are falling for both, those companies that were unnaturally sustained by easy money will go away. Bitcoin was launched as a form of electronic money in 2009 by an anonymous creator who went by the name Satoshi Nakamoto.

Its price rose—unsteadily, haphazardly, often violently and with big crashes sprinkled throughout—as more people jumped in. Numerous factors drove the rise, but crypto investors often shared a belief that the existing financial system had failed and crypto was the future. As fear of inflation increases, traders and investors are dumping assets in their portfolio that they deem risky. Shares of unprofitable companies have dropped swiftly, with many newly public technology companies losing more than half their value in the first half of the year.

Also high on the sell list: crypto. This space needs to be regulated, it needs to be safe for consumers. Many believe that there's a lot of value in the underlying technology, and in NFTs in particular, but are worried that selloffs like this current crypto winter will erode trust among investors. The current flushing-out of the crypto world strikes some investors as similar to the late-1990s and internet companies. On the one hand, investors were correct during that bubble: The internet was the future. But that didn't stop many of them from losing boatloads of money as hundreds of internet companies failed. At times, you will have to step out of your comfort zone to realize significant gains. Know the boundaries of your comfort zone and practice stepping out of it in small doses. As much as you need to know the market, you need to know yourself too. Can you handle staying in when everyone else is jumping ship? Or getting out during the biggest rally of the century? There's no room for pride in this kind of self-analysis. The best investment strategy can turn into the worst if you don't have the stomach to see it through.

F&O/sector watch

The Nifty VIX for the week closed at 22.87 per cent. PCR of OI for the week closed at 1.10. Punters were seen active in selling both the Out-of-The Money Call and Put options of the Nifty weekly expiry on June 23. Watch out for the 15,000 strike price Put option, which remains a key support level for the index as it has the highest Open Interest of the Nifty. On downside, 15000 level will act as strong support for Nifty, while 15500-15600 zone will cap any sharp upside. Both the indices the Nifty and the Bank Nifty have closed below their 100-Day Exponential Moving Average on weekly charts suggesting limited upside in upcoming sessions. Banking sector reported robust Q4FY22 earnings propelled by healthy recovery in loan growth and controlled provisions. Loan growth was led by healthy traction in Retail and SME segments while Corporate too witnessed a strong sequential trend.

Stock futures looking good are Alkem, AU Bank, Coromandel International, HAL, Indus Towers, ITC,

Maruti Suzuki and Tata Consumer. Stock futures looking weak are Apollo Tyres, Bharat Forge, IGL, Hind Unilever, Navin Flouro, Titan Inds, Voltas and Wipro.