This week, all eyes would be on US inflation data which would set the tone for Federal Reserve Chair Jerome Powell’s speech. A stronger-than-expected figure will strengthen the central bank’s case for a rigorous interest rate hike campaign.
Last week, domestic equities continued with their positive momentum for the third week in a row with Nifty ending the week well above 18k mark. The index is holding well above its 18K zones and we expect a gradual up-move in the market towards its all-time high level of 18,600 over the next few days with support base shifting higher. Further, India Vix below 16 levels is supporting the positive sentiments in the market.
A lot of stock specific action is being seen in the market as the results unfold. Nifty companies that have declared their results so far have seen their earnings grown by strong 25% YoY if we exclude global commodities like metals and oil & gas. So far the earnings season has been healthy, though, largely led by BFSI and Auto. As the benefits of the cool off in commodity costs start flowing in 2HFY23E, we expect other sectors to contribute too. Thus going ahead, market is likely to be driven by stability in global and local macros along with continued earnings delivery.
The global cues were mixed but still international peers too closed positively this week. The biggest event was US Fed interest rate decision where the central bank announced 75bps rate hike followed by BoE which hiked on similar lines.
On the domestic front, GST collection number for October came in at second highest ever while manufacturing PMI expanded at stronger pace to 55.3. In addition, strong FIIs flows over the last few days is also providing support to the markets.
Pharma stocks came back in limelight given healthy numbers posted by Sun Pharma and Dr Reddy’s. Cement stocks were in momentum on the back of news flows around expected price hike and good results posted by JK Cement and JK Lakshmi Cement. Along with secondary market, primary market too was abuzz with a lot of activities as four companies opened their IPOs for subscription. This week two more IPOs are lined up, to take advantage of positive momentum in secondary market.
(The author heads Retail Research at Motilal Oswal Financial Services Limited)