Mr. Mitul Shah - Head of Research at Reliance Securities.
Domestic equities closed lower following weak global cues. The Nifty lost 0.8%, while broader markets out-performed the main indices as Nifty Mid Cap was largely flat while Nifty Small Cap gained 0.2%. Most sectoral indices ended in red. Nifty PSU Bank and Nifty Media gained the most at 1.4% and 0.3% respectively. Nifty IT and Nifty Reality were the major laggards which plunged 1.6% and 1.3% respectively. India's foreign exchange reserves soared by $14.7bn to reach $544.7bn for the week to November 11, making it the steepest accretion since Aug'21. However, the reserves have fallen by over $110bn since March as the RBI has been propping up the rupee amid global volatility.
U.S. equities bounced back on Friday, while it closed lower for the week, after mixed retail earnings and hawkish comments from Feds. For the week, Dow Jones was down 0.1%, the S&P 500 index fell 0.8% while Nasdaq was down 1.6%. The yield on the 10-year Treasury note rose to 3.82% from 3.77% Thursday. On the economic front, U.S. existing home sales fell for a ninth straight month in October as high mortgage rates pushed buyers out of the market. Sales of previously owned homes declined 5.9% in October from the prior month to a seasonally adjusted annual rate of 4.43mn, the weakest rate since May'20. October sales fell 28.4% YoY, the biggest annual decline since Feb'08.
India has managed to perform well bolstered by its strong economic fundamentals. The 2QFY23 results season has largely concluded. At the aggregate, Nifty 50 companies managed to exceed Street estimates. However, margins of most manufacturing sectors remained under pressure due to elevated input costs and subdued realizations which adversely impacted operating cash flows of private companies. While the recent decline in input costs provided relief, much also depends on consumer demand. We expect a recovery starting 3QFY23 led by softening of commodity prices and monetary easing by central banks which is likely to boost demand. The Federal Reserve is unlikely to slow the pace of its interest-rate increases in the near term which can impact the market in the coming weeks, however, India is likely to see a multi-year economic up-cycle led by strong macros, and various government initiatives.