Post Market views - June 27, 2022 - Reliance Securities

Mr Mitul Shah, Head Of Research at Reliance Securities.

The domestic equities started the week on a positive note as concerns of rising global inflation is cooling down. Nifty rose 0.85% while broader markets outperformed the main indices as Nifty Mid Cap and Nifty Small Cap increased 1.1% and 2% respectively. Sectoral indices ended in green. Nifty IT witnessed the highest jump at 2.1% followed by Nifty Metal and Nifty Auto which were up 1.5% and 0.9% respectively. Moreover, earlier this month, MPC noted that inflation is likely to remain elevated for the first three quarters of the current financial year and projected inflation for the year at 6.7%.

U.S. equities recovered as expectations of aggressive rate hike from Federal Reserve is cool down. The S&P 500 finished the week up 6.4%, though it is still down about 18% from its last record close in January. The Dow industrials 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%. 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.

Crop sowing has picked up its pace and could avoid a worsening of food inflation. Monsoons will heavily influence India's economic outlook in the coming weeks. Farmers and the Indian government are banking on the monsoon rains to keep rice production, inventories and food inflation at a manageable level. Moreover, with 1QFY23 nearing its conclusion, investors are prepping for corporate earnings results for the quarter. Interest rate hikes, growing concerns about corporate profits and economic growth continue to throttle investor sentiments amid global issues of Russia-Ukraine war and rising COVID cases. 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. 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. Moreover, 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.