Earnings season done, market focus shifts to global, domestic cues

This week, the domestic markets are likely to continue a positive uptrend given receding global concerns. Federal Open Market Committee meeting minutes will be keenly eyed to get further cues on the interest rate cycle. Some of the other economic data points from the US will also be important drivers including existing home sales data and initial jobless claim data.

Primary market will be buzzing once again this week with five IPOs hitting the street including some big names like Tata Technologies, IREDA, Fedbank Financial, Flair Writing and Gandhar Oil.

Last week, domestic equities continued their positive momentum for the third week in a row with Nifty gaining 1.6 per cent (306 points) to close at 19,732 levels. Midcap100 and Smallcap100 sharply outperformed with gains of 2.6 per cent and 3.9 per cent respectively. Except for banks, all the sectors ended in green with IT, Realty and Auto being the biggest gainers.

Global cues turned positive after weak US inflation data raising hopes that the Fed might not hike interest rates any further. Additionally, news of fresh stimulus in China and sharp fall in UK’s inflation boosted the sentiments. This led to strong momentum in the beaten down sector IT which gained more than 5 per cent.

On the domestic front too, India’s retail inflation eased to a 4-month low of 4.9 per cent in October while core inflation fell to 43-month low of 4.3 per cent. Further crude oil prices fell to four month low - below $80/barrel on account of weakening global oil demand, which is a boon for Indian economy given its high import bill.

Moreover, the July-September quarter corporate earnings ended on a buoyant note with widespread outperformance across aggregates driven by margin tailwinds. We now expect the Nifty earnings per share to grow 24 per cent and 14 per cent in FY24 and FY25 respectively.

However, the financial sector saw selling pressure after the Reserve Bank of India increased risk weight on consumer loans by 25per cent across banks and NBFCs, while leaving housing, vehicle, education and gold loans out. On the other hand, Realty stocks surged almost 5 per cent as luxury home sales in India surged, as per reports. Further the Tier II and III cities are witnessing a surge in real estate development with almost 44 per cent of land deals between January 2022 and October 2023 taking place in these areas.

Even India’s auto sales saw a record breaking trajectory in the first nine months of the calendar year, by crossing the 3 million mark. The sales witnessed a surge between Onam and Bhai Dooj, achieving a record turnover of Rs 1.3 trillion.

With the conclusion of earning season, focus has now shifted to global as well as domestic cues. Overall, we expect positive momentum to continue in the market with sectoral rotation given the healthy macro data and receding global concerns.

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