Dalal Street review: Markets bounce back post RBI moves

Domestic equities continued with their weakness during the last week as deteriorating global economic environment led to sharp surge in bond yields and dollar index which bloated the fears of recession. Thus given this backdrop, it was expected of RBI to raise repo rates by 50 basis points (bps), which got delivered in line with expectation. Since May 2022 RBI raised interest rate by 190bps and expect repo rate to be raised to 6.5 per cent in this cycle. It expects inflation to come down close to its target of ~4 per cent over a two-year period and projected real GDP for FY23 at 7 per cent. Post RBI’s accommodative commentary, Nifty rallied on the last day of the week and partially erased the week’s losses. This has also given some support to falling rupee which had depreciated by 7 per cent since April 2022.

Markets across the globe saw extreme volatility as fear of economic downturn weighed on investor’s sentiments. Back home, even Foreign Institutional Investors (FIIs) turned heavy sellers over last few sessions, resulting in net outflow of more than Rs 15,000 crore for the month of September. However, with most key events now behind, market finally found some strength on Friday, boosted by RBI Monetary Policy Committee outcome. After 7 consecutive days of fall, Nifty bounced back and reclaimed the 17,000 zones, making the short term technical view positive. Nifty can now move towards 17,500-17,700 zones with key support around 17,000 and 16,850.

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The Palm oil prices have declined by ~50 per cent from its March peak, which would benefit select few FMCG companies. Even crude oil has corrected sharply to 9-month low. During the week Brent crude went below $85 per barrel before recovering a little towards the end. The softer oil prices are likely to favour paints, cement, tyre and FMCG companies.

Apart from the decline in commodity prices, Auto and consumption sectors would be in focus ahead of monthly sales data and high demand in the ongoing Navaratri festival. Pharma sector is seeing some value buying as market focused on defensive names in times of global uncertainty.

(The writer is the Head of Retail Research, Motilal Oswal Financial Services Ltd)