Post Market views - May 31, 2023 - Reliance Securities

Mr. Mitul Shah - Head of Research at Reliance Securities

Indian equities ended lower following weak global cues with the Nifty down 0.5%. Broader markets however outperformed and ended in green as Nifty Mid Cap and Nifty Small Cap were up 0.4% and 1.0% respectively. Majority of sectoral indices ended mixed. Financials were under pressure with the Nifty Bank correcting 0.7% and Nifty Financial Services ending 0.8% lower. Nifty Metal ended 0.8% lower following weak Chinese PMI data. Nifty Oil & Gas tumbled 1.3% following sharp correction in crude oil prices overnight. Nifty Realty, Nifty Healthcare, Nifty Consumer Durables (+0.8% each) and Nifty Pharma (+0.6%) were the major gainers.

US stocks swung between gains and losses as strength in the technology sector was offset by uncertainty about the debt ceiling issue. The S&P 500 closed flat, the Nasdaq Composite ended 0.3% higher, while the Dow was down 0.1%. The yield on the benchmark 10-year note was down 0.12 percentage points to 3.7%. The deal agreed on Saturday would raise the country's $31.4tn debt ceiling for two years until after the next presidential election in late 2024. Meanwhile, Chinese manufacturing activity shrank for a second straight month in May raising further questions over an economic rebound in the country as weak demand and slowing capital investment pressured the country's biggest economic engines.

India is due to report its 4QFY23 GDP data today evening. The IMD has reiterated its previous forecast of a normal monsoon (96% of LPA) this year. This augurs well for the agriculture and allied sectors and should help boost kharif output. It will boost farm income and will be a tailwind for overall rural consumption benefitting sectors such as automobiles, fertilizers, agrochemicals and FMCG. It will also help tame inflation and boost hopes of a dovish monetary policy in 2HFY24. Globally, the Fed minutes meanwhile have offered some soothing words, indicating that additional policy firming may not be required as it could take a toll on growth. But at the same time, Fed members acknowledged the challenge on the inflation front, maintaining that the fight against rising prices is far from over. Automobile stocks will also be in focus ahead of the May sales data which will start tricking in from tomorrow. Brent crude has corrected sharply overnight and is now trading at $72/barrel.

Source : Equity Bulls

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