Post Market views - June 29, 2022 - Reliance Securities

Mr Mitul Shah, Head Of Research at Reliance Securities.

Domestic equities ended lower following negative global cues amid rising crude prices and fears of sustained inflation. Nifty declined 0.3%, while broader markets under-performed compared to the main indices as Nifty Mid Cap and Nifty Small Cap plummeted 0.53% and 0.56% respectively. Most sectoral indices ended in red with Nifty IT witnessing the highest plunge at 1.29% followed by Nifty FMCG and Nifty Bank which were down 1.27% and 1.1% respectively. Nifty Oil & Gas was the major gainer which was up 1%. Moreover, the Indian rupee hit a record low of ~78.97 against the Dollar, as U.S crude futures nearly touched $118 per barrel. Yesterday, the GST Council has approved the tax rates on some goods and services and also removed tax exemptions on some items. GST compensation to states ends on June 30 as five years of GST implementation will end. Several states have urged the Centre to extended the deadline for compensation. The GST Council's meeting has started on the second and the last day at Chandigarh. So far, the council has deferred proposal to levy 28% GST on online gaming, casinos and lottery.

U.S. equities gave up early gains and ended lower as investors remain worried about global inflation and the pace at which the central banks could tighten monetary policy in the near future. The Dow Jones Industrial Average dropped 1.6%, the S&P 500 lost 2%, while the technology-focused Nasdaq Composite Index fell 3%. The yield on the 10-year U.S. Treasury note advanced to 3.21%, from 3.19% on Monday. Data from the Conference Board suggested that consumers' short-term outlook for the U.S. economy dropped sharply to its lowest point in nearly a decade. The University of Michigan's gauge of consumer sentiment reached a final reading of 50 in June, the lowest reading since 1952, and down from both an initial reading earlier in the month and May's 58.4 reading.

In the Group of Seven (G7) summit in Germany the leaders have proposed an imposition of "severe and immediate economic costs" on Russia. In the coming weeks it is likely to undertake measures to bar imports of Russian oil above a certain level. The leaders also agreed on a ban on imports of Russian gold and to step up aid to countries affected by food shortages by the blockade on Ukraine grain shipments through the Black Sea. The group aims to expand targeted sanctions to further restrict Russia's access to key industrial inputs, services and technologies. PM Modi who also attended the summit stated that hostilities in Ukraine must be stopped with the means of dialogue and diplomacy. Moreover, under the Partnership for Global Infrastructure and Investment (PGII) announced by US President Joe Biden, the G7 has committed to invest $600 billion by 2027 in several countries including India.

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. 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.