Mr. Mitul Shah - Head of Research at Reliance Securities.
Indian equities closed lower after positive opening. Nifty declined 1.1%, while broader markets underperformed the main indices as Nifty Mid Cap and Nifty Small Cap plunged 1.5% and 1.2% respectively. All sectoral indices ended in red except Nifty IT (+.0.1%). Nifty PSU Bank plummeted the most at 2.7% followed by Nifty Reality and Nifty Bank which were down 2% and 1.7% respectively. India's gold imports, which have a bearing on the Current Account Deficit, rose 6.4% to $12.9bn during Apr-Jul this fiscal due to healthy demand. In Jul'22, however, gold imports fell sharply by 43.6% to $2.4bn.
The U.S. equities ended higher with S&P 500 rose 0.2%, Dow Jones ticked up 0.1% while Nasdaq added 0.2%. The market gained in past couple of weeks on signs that inflation was moderating and hopes that the Fed would ease off from its aggressive rate hikes. The yield on the 10-year U.S. Treasury note dipped to 2.879% from 2.894% on Wednesday while Brent crude rose 3.1% to $96.59 a barrel. U.S. existing home sales fell by 5.9% MoM in July to 4.81mn. This is a decline for the sixth straight month, the longest streak of declines in more than eight years, due to higher mortgage rates.
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 37% YoY, while EBITDA and PAT grew by 18% and 21% 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.