Omicron, tightening global liquidity to squeeze Indian equities further

Lately, FIIs outflows have pulled the equities lower and depreciated the Indian rupee. So far, the foreign institutions have sold over $4 billion worth of equities in this qurter. 

Consequently, the Indian market logged its second worst week in almost 10 months in the week ending Friday. Nevertheless, attractive valuations along with lower oil prices are expected to arrest the slide.

"From the top of 18,604, each of the Nifty's fall has been sharper than the preceding rises, with two weeks of rise getting nullified in just one week. This clearly shows the sell-on-rise behaviour of institutional investors and smart traders," said Deepak Jasani, Head of Retail Research, HDFC Securities. 

"In the process, Nifty logged its second worst week in 10 months. While the technical indicators are close to getting oversold, year-end selling pressure and fundamental macro concerns on the global front could postpone the bottom formation in the near term," he added.

Besides, the commencement of holiday season is expected to lower the volumes during the upcoming week. 

"The overall market remains in a tight range with bearish undertone, as selling pressure is intact at higher levels. Negative global cues, continued FII selling, absence of any positive trigger and increasing cases of Omicron are likely to continue putting pressure on the market," said Siddhartha Khemka, Head of Retail Research, Broking & Distribution, Motilal Oswal Financial Services. 

"Next week, the market would eye China's monetary policy outcome along with GDP data from the US and the UK," Khemka added.

According to Vinod Nair, Head of Research at Geojit Financial Services: "Since all major domestic macroeconomic data have been released, the week ahead will be driven by sentiments in the global markets.

"Tightening liquidity in the global markets remains a concern, as this will tempt global investors to pull-out money from the emerging markets such as India."

On technical levels, Rohit Singre, Senior Technical Analyst at LKP Securities, said: "We may see more drag down towards the 17,100-17,000 mark, which is another support zone on the downside.

"On the higher side, immediate hurdle is formed near the 17,300-17,400 zone, and if we cross above the said levels, one can expect a positive breakout."