Post Market Views - June 16, 2022 - Reliance Securities

Mr Mitul Shah, Head Of Research at Reliance Securities.

Domestic equities closed sharply lower despite a gap-up opening, post the Federal Reserve's announcement of a 75bps interest rate hike and US futures turning negative shedding gain recorded on Wednesday. Nifty declined 2.1% while broader markets underperformed compared to the main indices as Nifty Mid-Cap and Nifty-Small Cap fell by 2.5% and 3.4% respectively. Sectoral indices ended in red with Nifty Metal plunging the most at 5.2%, followed by Nifty Media and Nifty Reality which plummeted 3.2% and 2.8% respectively. Furthermore, while the FED downgraded U.S growth forecasts for FY23, it reassured that a recession is unlikely. Data suggested that foreign investors have sold equities to the tune of Rs. 1,92,104 crores which includes Rs. 24,949 crores worth of FPI sold in June so far.

U.S. equities rallied after the Federal Reserve approved its biggest interest-rate hike of 75bps since 1994, in-line with what investors had anticipated earlier. The S&P 500 rose 1.5%, snapping a five-day losing streak. The Dow Jones Industrial Average added 1%, while the Nasdaq Composite rose 2.5%. The yield on 10-year Treasury slipped to 3.389% from 3.482% on Tuesday. However, Fed Chairman Jerome Powell said that such unusually large interest rate hikes will not be a norm.

India's retail inflation came down to 7.04% YoY in May from 7.79% in April owing to easing food prices in the month of May. The government is eager to assist with inflation management in order to keep monetary tightening to a minimum. Following RBI's 50 bps hike, US Fed raised interest rates by 75bps as expected. The ECB raised its inflation projections but cut its growth outlook as the conflict in Ukraine continues to weigh on confidence, consumption and investment. Globally, Russia-Ukraine war continues to impact market sentiments while Shanghai prepares for a reopen after several weeks of lockdown.