Mr. Mitul Shah - Head of Research at Reliance Securities.
Indian equities extended gains from its previous session and closed higher. Nifty rose 0.7%, while broader markets under-performed the main indices as Nifty Mid Cap and Nifty Small Cap gained 0.6% and 0.5% respectively. All sectoral indices ended in green except Nifty Auto (-0.4%). Nifty PSU Bank gained the most at 2.3% followed by Nifty Media and Nifty IT which were up 1.5% and 1.2% respectively. Meanwhile, survey data from Retailers Association of India (RAI) showed that retail businesses across India, reported a growth of 18% in sales as compared to pre-pandemic levels (Jul'19).
The U.S. equities ended as S&P 500 gained 0.2%, Nasdaq fell 0.2% while Dow Jones added 0.7%. The market rallied in past couple of weeks despite uncertainly and higher inflation. The yield on the 10-year Treasury note rose to 2.822%, up from 2.790% on Monday. Meanwhile, data showed that housing starts in July fell 9.6% MoM to 1.45mn. Recent data showed that the WPI inflation moderated to 13.93% in July as against 15.18% in June, primarily due to lower food, metals and chemical prices. The earnings season has ended with strong revenue growth while pressure continued on the margins due to commodity inflation. For 1QFY23, revenue of NSE 500 companies increased by 39% YoY, while EBITDA and PAT grew by 19% and 23% respectively. The market is likely to remain volatile in the near-term. However, strong economic rebound, normalized commodity prices, inflation within targeted range and better visibility is expected by 2HFY23. Our FY23 target for Nifty is 19,000 at 20x FY24E EPS. FII investments have started in past few weeks and are likely to continue. While oil and commodity prices have softened over the past few weeks, supply chain bottlenecks and effects of the Russia-Ukraine war, remain the major overhangs for the Indian economy.