Markets end in green despite weak global cues

Equity markets ended the week on a flat note with marginal positive bias despite weak global cues. Nifty/Sensex closed +0.3% higher the week at 15,752/52,908 levels.

Broader market too ended the week in positive territory with Midcap100 /Smallcap100 up +0.5%/+1.0%. Except for Banks, all the sectors ended with gains. Foreign institutional investors (FII) sold equities worth Rs 4,500 crore (data till Thursday) while the domestic institutional investors (DII) bought a similar quantum during the week.

Global markets fell as weak US consumer data and lower US GDP estimates dented investors’ sentiments during the week. US GDP estimates for Q1FY23 got revised down for the third time to a contraction of 1.6%, amid a record trade deficit and supply chain disruptions.

On the other hand, US consumer confidence dropped to 98.7 - a 16-month low - in June on fears of high inflation and economic slowdown.

Read | GST at 5: Succeeded, but long way to go

Sentiments were further dented after comments from US Fed suggested that another 75 basis points rate hike was imminent in its next policy meet.

On the domestic side, markets ended the week on a flat note as a marginal fall in crude prices, removal of Covid restrictions in China, good monsoon progress and healthy GST collection brought some relief to the market.

The selling intensity of FIIs has also reduced over the past few sessions helping the market. However, on Friday, the government announced a levy of taxes on the export of petrol and diesel, and a windfall tax on domestic crude oil, which dented market sentiments somewhat resulting in a decline in Nifty heavyweights Reliance and ONGC by 7-13%. The imposition of taxes is likely to severely restrict the benefits from elevated global crude oil prices to earnings of the oil refinery companies.

On a monthly basis, Nifty struggled to gain footing in the month of June and ended the month with a loss of 5%. Resurgence in the US dollar, disappointing global economic data and aggressive monetary policy stance by various central banks led to concerns over slowing economic growth as well as the possibility of a recession next year.

On the domestic side, the fall in the rupee to record low levels, consistent FII selling and elevated crude oil prices were key negatives leading to the sharp monthly fall in the market.

We expect the market to remain subdued with downward pressure going forward as global headwinds remain a key overhang. However, healthy progress in monsoon and expectations of good Q1FY23 earnings along with reasonable valuations are providing some comfort to the long-term investors in the market.

(The writer is the Head – Retail Research, Motilal Oswal Financial Services Limited)