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Market Commentary
Post Market views - August 26, 2022 - Reliance Securities
Posted On : 2022-08-26 20:43:14( TIMEZONE : IST )
Mr. Mitul Shah - Head of Research at Reliance Securities.
Indian equities closed slightly higher while investors awaited on FED chair Jerome Powell's speech at Jackson Hole. Nifty increased 0.2%, while broader markets out-performed the main indices as Nifty Mid Cap and Small Cap rose 0.6% and 0.7% respectively. Most of the sectoral indices ended in green. Nifty Metal gained the most at 1.8% followed by Nifty Consumer Durables which was up 1.3%. Nifty Media was the major laggard which fell 0.7%, followed by Nifty Reality which plunged 0.4%. Meanwhile, estimates suggest that the Indian economy likely grew by 15.1% in Q1FY23 aided by a favourable base and revival in services as all Covid restrictions were removed. The official data is set to release next week.
U.S. equities closed higher as market digested a batch of economic data and awaited the annual gathering of central bankers in Jackson Hole. The S&P 500 gained 1.4%, Nasdaq added 1.7% while Dow Jones advanced 1%. Government bond yields slipped, with the yield on 10-year Treasury moving to 3.023% from 3.105% on Wednesday. The new claims for unemployment benefits fell to 243,000 last week, from a revised 245,000 the week before. Meanwhile, the average rate on a 30-year fixed mortgage climbed to 5.55%.
Food inflation continues to push the negative sentiments as paddy acreage in India is down 8.25% YoY in the week ended August 18. Moreover, 80% of India's total rice production is done during this season. Despite a multiple headwind like rising interest rate, monetary tightening and volatile commodity costs, the Nifty has outperformed global markets since Dec'21. 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.
