Mr. Mitul Shah - Head of Research at Reliance Securities.
Domestic equities closed higher after a weak opening. The Nifty gained 0.5%, Nifty Mid Cap was up 0.6% while Nifty Small Cap was largely flat. All sectoral indices ended in green except Nifty Reality (-1.2%). Nifty PSU Bank gained the most at 1.7% followed by Nifty Metal and Nifty IT which were up by 0.9% and 0.8% respectively. Meanwhile, the Indian government will likely raise its allocation to the rural development ministry by 18% to Rs 1,600bn for FY23.
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 lost 1%, while the Dow Jones 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.
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.