Post Market views - July 1, 2022 - Reliance Securities

Mr Mitul Shah, Head Of Research at Reliance Securities.

Indian equities ended lower after following weak global cues. Nifty declined 0.2%, while broader markets outperformed compared to the main indices as Nifty Mid Cap and Nifty Small Cap rose 0.8% and 0.4% respectively. All sectoral indices ended in green except Nifty Oil & Gas which declined 4.2%. Nifty FMCG gained the most at 2.8% followed by Nifty Reality and Nifty Fin Service which were up 1.6% and 1.25% respectively. Meanwhile, the government has raised the import duty on gold from 7.5% to 12.5% to control a fast-widening currency deficit. It also increased export duties on diesel and petrol by Rs13/litre and Rs6/litre respectively, to ensure domestic availability of fuel and to curb the Rupee from plunging further, which recently hit 79.12 against the Dollar.

U.S. equities ended lower with the S&P 500 declined by 0.9%, bringing its losses for the 1HCY22 to 21%. The Dow Jones fell 0.8%, while the Nasdaq Composite declined by 1.3%. The market seen worst first half of the year since 1970, a sharp reversal of the rally that lifted markets in the preceding two years. 10-year U.S. Treasury note fell to 2.973% from 3.091%. Moreover, ~90% of investors expect the U.S. to enter a recession before the end of 2023. Globally, the leaders of G7 aim to have targeted sanctions on Russia and impose stringent economic costs on the country. The group is likely to undertake measures to bar imports of Russian oil above a certain level and put a ban on imports of Russian gold.

As 1QFY23 has ended, market await on corporate earnings results for cues. Rising inflationary pressures and concerns of global recession, continue to impact market sentiments amid geopolitical issues of the prolonged Russia-Ukraine war. Crop sowing has picked up its pace and should mitigate food inflation. Monsoons will heavily influence India's economic outlook in the coming weeks. The government is banking on the monsoon rains to keep rice production, inventories and food inflation at a manageable level. While Oil and food input prices have majorly pushed up inflation, commodity prices are showing signs of settling down.