Mr. Mitul Shah - Head of Research at Reliance Securities.
Indian equities closed lower after positive opening as concerns over global inflation persisted. The Nifty declined 0.1%, while broader markets out-performed the main indices as Nifty Mid Cap and Nifty Small Cap rose slightly by 0.1% and 0.2% respectively. Sectoral indices ended mixed. Nifty Oil & Gas was the highest gainer at 1.1% followed by Nifty IT and Pharma which were up 1% each. Nifty Metal was the major laggard which plunged 0.9%, followed by Nifty Fin Services (-0.8%). Rupee ended at 81.57 per dollar against yesterday's close of 81.62.Meanwhile, the central bank is likely to deliver a fourth consecutive policy rate hike this week, with a 50bps increase, to cushion inflationary pressures.
U.S. equities closed lower reflecting concerns about the pace of global growth and the price of central-bank's efforts to lower inflation. The Dow Jones declined by 1.1%, marked its fifth down trading day in a row. The S&P 500 fell 1%, while Nasdaq slipped 0.6%. The yield on 10-year Treasury rose to 3.878%, its highest level since 2010. Meanwhile, rocketing energy prices in Europe have introduced yet more uncertainty for the markets, hurting the economy.
The US and Europe are all headed towards a recession, while India in all likelihood to prevent it very well. The Bank of England raised its key interest rate by another 50 bps to 2.25%, matching its half-point increase last month, the biggest hike in 27 years. The inflation has remained above the upper tolerance band of RBI for the eighth straight month and therefore it is expected to remain sticky at ~7.5% in FY23, driven by increases in food prices as per high frequency food price data. The rise in repo rate coupled with the inflation is likely to impact the market in the near term. Going forward, the key events for the markets includes, -inflation forecast, Comments on external balance sheet, the tone of the policy statement and path on rate normalization.