Post Market views - August 25, 2022 - Reliance Securities

Mr. Mitul Shah - Head of Research at Reliance Securities.

Indian equities closed lower with Nifty declined 0.5%, while broader markets out-performed the main indices as Nifty Mid Cap and Small Cap rose 0.1% and 0.5% respectively. Most of the sectoral indices ended in red except Nifty PSU Bank (+2.7%), Nifty Reality (+1.5%) and Nifty Consumer Durables (+0.8%). Nifty IT was the major laggard which fell 0.9%, followed by Nifty Metal which plunged 0.5%. Meanwhile food inflation continues to push the negative sentiments as paddy acreage in India is lower by 8.25% YoY in the week ended August 18. Moreover, 80% of India's total rice production is done during this season.

U.S. equities closed higher with S&P 500 rose 0.3%, Dow Jones was up 0.2% while Nasdaq climbed 0.4%. The yield on the 10-year Treasury note edged up to 3.105% from 3.053% on Tuesday, extending a three-day climb. Fed officials have signalled that interest rates are likely to continue increasing to fight inflation. The central bank begins its annual economic policy symposium in Jackson Hole on Thursday, and Mr. Powell is set to speak on Friday.

Despite a multiple headwind like rising interest rate, monetary tightening and volatile commodity costs, the Nifty has outperformed global markets since Dec'21. More downgrade seen in EPS compared to upgrades in 1QFY23. FIIs bought worth Rs445bn so far in Aug'22 into Indian equities. 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.

Source : Equity Bulls

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