<p>The Nifty, last week, continued its northbound journey for the fifth week in a row amid slowing inflation, robust macro data and return of the foreign institutional investor (FII) inflows. Nifty/Sensex gained 60/183 points (+0.3%) to close at 17,758/59,646 levels. Midcap 100/Smallcap 100 too ended with marginal gains of 0.6%/0.4%.</p>.<p>Global cues were weak as sentiments got dampened on the back of concerns over the Fed’s plans to lift interest rates aggressively in order to fight inflation. Despite inflation softening in the US marginally to 8.5% in July from 9.1% in June, Fed continued to sound hawkish. Fed officials suggested hiking rates to a restrictive level but easing the pace of hikes at some point. The surge in UK inflation to a new 40-year high at 10.1% also dented sentiments.</p>.<p>On the domestic front, positive momentum continued throughout the week despite mixed global cues. However, some profit booking was seen on the last day on account of concerns over interest rate hike and the weakening rupee, which once again crossed the 80 mark.</p>.<p>Overall the sentiments got boosted for the week led by softening of both CPI and WPI inflation data, positive IIP data along with healthy monsoon. The return of FII money also accelerated the momentum. FIIs have been continuous buyers over the past 13 sessions, though they turned sellers on Thursday.</p>.<p>Markets have bounced back sharply by 18% over the last two months. Nifty is now just 3-4% away from its all-time high. The risk-reward ratio may not be favourable at this juncture as the valuations once again have turned a little expensive at 20x one year forward, which is slightly at a premium to its long-term average. Even the Q1 earnings season, although healthy, saw minor downgrades in the earnings estimate, which also does not support the valuation.</p>.<p>Hence consolidation is likely to continue in the near term in the absence of a fresh trigger. However, the festive season is about to begin and is expected to be normal after two years. This should auger well for consumption-oriented sectors and should keep the overall momentum positive in the market. In the meanwhile, stock-specific action is likely to continue in the market.</p>.<p><span class="italic"><em>(The writer is the Head of Retail Research, Motilal Oswal Financial Services Limited)</em></span> </p>
<p>The Nifty, last week, continued its northbound journey for the fifth week in a row amid slowing inflation, robust macro data and return of the foreign institutional investor (FII) inflows. Nifty/Sensex gained 60/183 points (+0.3%) to close at 17,758/59,646 levels. Midcap 100/Smallcap 100 too ended with marginal gains of 0.6%/0.4%.</p>.<p>Global cues were weak as sentiments got dampened on the back of concerns over the Fed’s plans to lift interest rates aggressively in order to fight inflation. Despite inflation softening in the US marginally to 8.5% in July from 9.1% in June, Fed continued to sound hawkish. Fed officials suggested hiking rates to a restrictive level but easing the pace of hikes at some point. The surge in UK inflation to a new 40-year high at 10.1% also dented sentiments.</p>.<p>On the domestic front, positive momentum continued throughout the week despite mixed global cues. However, some profit booking was seen on the last day on account of concerns over interest rate hike and the weakening rupee, which once again crossed the 80 mark.</p>.<p>Overall the sentiments got boosted for the week led by softening of both CPI and WPI inflation data, positive IIP data along with healthy monsoon. The return of FII money also accelerated the momentum. FIIs have been continuous buyers over the past 13 sessions, though they turned sellers on Thursday.</p>.<p>Markets have bounced back sharply by 18% over the last two months. Nifty is now just 3-4% away from its all-time high. The risk-reward ratio may not be favourable at this juncture as the valuations once again have turned a little expensive at 20x one year forward, which is slightly at a premium to its long-term average. Even the Q1 earnings season, although healthy, saw minor downgrades in the earnings estimate, which also does not support the valuation.</p>.<p>Hence consolidation is likely to continue in the near term in the absence of a fresh trigger. However, the festive season is about to begin and is expected to be normal after two years. This should auger well for consumption-oriented sectors and should keep the overall momentum positive in the market. In the meanwhile, stock-specific action is likely to continue in the market.</p>.<p><span class="italic"><em>(The writer is the Head of Retail Research, Motilal Oswal Financial Services Limited)</em></span> </p>