U.S. equities recovered as sentimental impact of aggressive rate hike from Federal Reserve is cooling down in addition to partial recovery from over hammered equity market bounce back. Commodity softening is another key booster of equity. The S&P 500 closed 6.4% higher for the week, though it is still down ~18% from its last record close in Jan'22. The Dow gained 5.4% for the week, while the Nasdaq rallied 7.5%. The yield on the benchmark 10-year Treasury note climbed to 3.125% from 3.068% on Thursday. Moreover, the University of Michigan's gauge of consumer sentiment reached a final reading of 50 in June, which was the lowest reading since 1952, and down from both an initial reading earlier in the month and May's 58.4 reading. Furthermore, new-home sales rose 10.7% in May to a seasonally adjusted annual rate of 696,000 and it is expected that rising mortgage rates will weigh on sales later this year.
On domestic front: The domestic equities closed the week in green as concerns of a global recession is coming down and falling commodity prices supporting investors' faith. Nifty rose 2.7% for the week, while broader markets underperformed the main indices with Nifty Mid Cap and Nifty Small Cap increased 2.2% and 1.8% respectively. Most sectoral indices ended higher for the week. Nifty Auto witnessed the highest jump at 7% followed by Nifty Consumption and Nifty Consumer Durables which were up 5.2% and 4.6% respectively. Nifty Metal was the major laggard which declined 2.7% over the week.
Inflationary pressures remain persistent while central Banks are continually attempting to tame and bring it under tolerance levels. While Oil and food input prices have majorly pushed up inflation, commodity prices are showing signs of settling down as copper witnessed its sharpest weekly fall since Mar'20. Moreover, FIIs have sold more than $39bn over the past 9 months, making it the largest and longest sell-offs, even worse than the global financial crisis of 2008. The much discussed GST regime will turn 5 years next week, it has witnessed many twists and turns so far. The GST Council is meeting on June 28-29 in and likely to consider e-way bill mandatory for intra-state movement of gold or precious stones worth Rs 2 lakh and above and also e-invoicing mandatory for certain B2B transactions.
Over the next few weeks monsoons will be the key factor for the Indian economy as crop sowing has picked up its pace and hence could avoid a worsening of food inflation. Markets focus is clearly on the cues of monetary policy tightening, both by the US Fed and the RBI. Even as the rupee is making some noise, plunging to new lows as investors run away from the emerging market currencies. Monsoons will heavily influence India's economic outlook in the coming weeks. The government is banking on the monsoon to keep rice production, inventories and food inflation at a manageable level. Moreover, with 1QFY23 nearing its conclusion, the market will look for results and management commentary very closely. Interest rate hikes, growing concerns about corporate profits and economic growth continue to throttle investor sentiments amid global issues of Russia-Ukraine war.