U.S. equities wobbled and ended mixed as investors worried about a rise in Covid-19 infections in China and the current state of the U.S economy. The S&P 500 dropped 0.3%, the Nasdaq Composite lost 1%, while the Dow Jones Industrial Average was largely flat. The yield on the benchmark 10-year Treasury note was marginally up at 3.819%, compared to 3.817% on Friday. Meanwhile, markets await the release of the minutes of the previous FED meeting on Wednesday.
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.
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 hikes 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.
The markets are likely to see gap up opening; SGX nifty is up 40 points compared to previous spot Nifty closing. Asian Markets are trading mixed; Nikkei is up 0.8% while Heng Seng is down 0.8%.