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Market Commentary
Post Market views - August 24, 2022 - Reliance Securities
Posted On : 2022-08-24 19:36:30( TIMEZONE : IST )
Mr. Mitul Shah - Head of Research at Reliance Securities.
Indian equities closed slightly higher in a volatile session. Nifty increased 0.2%, while broader markets out-performed the main indices as Nifty Mid Cap and Small Cap rose 0.7% and 0.8% respectively. All sectoral indices ended in green except Nifty IT (-0.3%), Nifty Pharma (-0.3%), Nifty Auto (-0.1%) and Nifty Consumer Durables (-0.1). Nifty Reality gained the most at 1.8% followed by Nifty Media and Nifty Pvt Bank which were up 1.7% and 1.6% respectively.
U.S. equities edged slightly lower due to weak data on business activity. The S&P 500 lost 0.2%, Dow Jones fell 0.5%, while Nasdaq was largely flat. The private-sector business activity in the U.S. contracted for a second straight month in August, with particular softness in the services sector as demand weakened in the face of inflation and tighter financial conditions. The yield on the 10-year U.S. Treasury note rose to 3.053% from 3.035% on Monday, gaining for a third consecutive trading day. The market is waiting for speech by Fed Chairman in Jackson Hole which is scheduled on 25-27th August in which he is expected to give an update on the central bank's efforts to combat inflation.
Despite a multiple headwinds like rising interest rate, monetary tightening and volatile commodity costs, the Nifty has outperformed global markets since Dec'21. While DII have started selling, FIIs bought worth Rs457bn so far in Aug'22 into Indian equities. More downgrade seen in EPS compared to upgrades in 1QFY23. We expect FII to remain net buyers as valuations are comparatively reasonable while India's growth is high compared to other emerging nations. Though near-term negatives in terms of concerns of depreciating rupee, widening trade deficit and volatility in global crude prices continue to exert pressure on economy and equity markets, we expect strong economic rebound, normalized commodity prices, inflation within a targeted range and better visibility in 2HFY23E.
