Key benchmarks ended in deep red terrain as Nifty and Sensex posted losses of more than 200 and 600 points, respectively in the week. The rapidity with which central banks across the globe are hiking interest rates, investors are worried slackening growth will push key economies into recession.
The coming week is going to be crucial as, on the economic front, market participants will be eyeing the S&P Global Manufacturing, which will be released on October 3, and S&P Global Services PMI which will come out on October 6. Auto and cement stocks will be reacting to their monthly sales numbers at the start of the week. Also in the primary market, an important IPO is lined up. Electronics Mart India has a consumer durables and electronics store under the name of 'Bajaj Electronics’ and will be entering the primary market to raise up to Rs 527 crore in a price band of Rs 56-59 per share.
On the global front, investors will be eyeing economic data from the world’s largest economy, the United States (US), starting with S&P Global Manufacturing PMI Final on October 3 followed by Balance of Trade on October 5, Initial Jobless Claims on October 6, and finally Unemployment Rate on October 07.
Market veteran Dhiraj Relli, MD & CEO, HDFC Securities, said: “The MPC voted to raise the repo rate by 50 bps taking it to 5.9% as widely expected while remaining focused on the withdrawal of accommodation. A higher rate hike is justified in the backdrop of inflation remaining at elevated levels with the projected trajectory being above RBI's target during the entire forecast horizon. Economic growth has remained resilient in the face of an adverse global environment. The recent sharp depreciation in the rupee (although well managed compared to other emerging countries) might have weighed on members’ decision in favour of a larger rate hike, addressing external sector imbalance and reducing the interest rate differential.”
Relli added “Unchanged inflation forecast at 6.7% for FY23 (and 5% in Q1FY24) is reassuring with a high average crude oil price of US$ 100 per barrel considered in this, providing a cushion. FY23 GDP projection was lowered marginally from 7.2% to 7% for FY23. Overall, it was a prudent policy announcement with no negative surprises which is reflected in the impact on the 10-year yield and stock markets. The next stage of response could be calibrated; we expect the terminal repo rate would be 6.25-6.40% by FY23 end.”
In the passing week key benchmarks tumbled again, the 30-share Sensex declined 1.16 per cent to 57426.92 on September 30 from 58,098.92 on September 23. Likewise, the 50-share Nifty index slipped 1.34 per cent to 17094.35. The markets made a pessimistic start to the week as S&P Global Ratings projected India's economic growth at 7.3 percent in the current fiscal with downside risks, and said inflation is likely to remain above RBI's upper tolerance threshold of 6 percent till the end of 2022. Traders also took note of the Asian Development Bank’s (ADB) report stating that with economic activity still to reach pre-pandemic levels, the RBI may slow down the pace of rate hikes until next year to quell soaring inflation while supporting growth.
Investment strategist Vinod Nair, Head of Research at Geojit Financial Services said: “An in-line rate hike along with the RBI’s confidence in the economy’s growth momentum aided the domestic market to alter the seven-day losing streak. The decision to retain inflation at 6.70% with a marginal cut but a healthy GDP forecast of 7.0% indicates the resilience of the Indian economy. Although the commentary warned about prevailing risks to the domestic economy from the global economy, the MPC refrained from sounding very hawkish. Continuation of the policy stance as 'withdrawal of accommodation' indicates more rate hikes in the future, but data-driven."
As many as 15 stocks in the Nifty 50 index delivered a positive return to investors in the passing week. With a gain of 4.7 per cent each, Power Grid Corporation of India and Dr. Reddy's Laboratories emerged as the top gainers in the index. They were followed by Cipla (up 4.4 per cent), HCL Technologies (up 4.1 per cent), Bharti Airtel (up 3.7 per cent), and Infosys (up 3.5 per cent).
Nestle India, Sun Pharmaceutical Industries, and Tata Consumer Products also advanced by over 2 per cent. On the other hand, Adani Ports and Special Economic Zone, Hero MotoCorp and Maruti Suzuki India declined 10.1 per cent, 7.7 per cent and 5.6 per cent, respectively. Sector wise, the BSE Teck index gained 2.1 per cent during the week gone by. BSE Healthcare and BSE Information Technology indices have also given over 1 per cent returns. In contrast, the BSE Power index declined the most 4.7 per cent, while BSE Metal, BSE Reality and BSE Auto index retreated 3.6 per cent 2.9 per cent, and 2.8 per cent, respectively.
Market Watcher Rupak De, Senior Technical Analyst at LKP Securities said: “Nifty snapped its losing streak as the index posted a gain after seven consecutive days of correction. On the lower end, it found support at 16800 and moved up. On the daily chart, the index has formed a bullish engulfing pattern. The daily RSI is seen to be entering the bullish crossover. Going forward, the trend may remain bullish with an upside potential of 17300/17500. On the lower end, 16950/16800 may continue to act as crucial support for the short term."
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