This week, domestic equities are expected to continue their dream run and scale new highs on the back of strong domestic cues and receding worries over global recessionary fears. On the economic calendar front: US, Europe, China and India’s manufacturing & services PMI data would be released this week, providing direction to the market. Even FOMC meeting minutes and US Non-farm payroll data would be keenly watched out for as they would provide some insights into FOMC’s next course of action.
We expect the uptrend in Indian equities to continue in the near term. The auto sector is expected to be in the limelight, as companies would release monthly sales data. Even reducing the monsoon deficit would keep agri and rural-related sectors in focus.
Last week, domestic equities rallied with Nifty and Sensex scaling a lifetime high of 19,202 and 64,769 levels respectively. After making several attempts over the previous week, Nifty finally managed to cross its previous highs and move swiftly towards its new highs. Nifty ended the week with handsome gains of 522 points (+2.8 per cent) at a new high of 19,188 levels. All sectors ended in green with pharma, auto and IT gaining more than 3 per cent. Banking and financials along with auto and infra too joined the bandwagon and touched new lifetime highs last week while Pharma touched a 52-week high.
Nifty ended the month of June on a strong note with gains of 3.5 per cent. This was the third consecutive month of gain which helped Nifty end the first half of the year at a new high with a profit of 6 per cent. It took almost 625 days for Nifty to gain 1000 points (from 18,000 to 19,000 levels), compared to 41 days it took for the previous 1000 points (from 17,000 to 18,000).
Even broader market touched new highs during the month with gains of 5.9 per cent/6.6 per cent in Nifty Midcap100/Nifty Smallcap100. They strongly outperformed Nifty in the H1CY2023 with returns of 13.4 per cent/11.4 per cent respectively. Strong institutional flows, healthy macros, and robust earnings growth drove the domestic market toward its new highs. Further, vital US macroeconomic data soothed the investors’ sentiments. With the onset of the monsoon and RBI taking a rate pause, we expect market momentum to continue and remain buoyant.
Broad-based buying was seen in domestic equities last week. HDFC twins too infused strength after the company announced the merger to be tentatively effective from July 1. Further, the monsoon progress has been good over the last couple of days leading to the cumulative rainfall deficiency to come down to -10 per cent during June 1-30, from >50 per cent earlier. FIIs too continued with their strong inflows (>Rs 20,800 crore for the month of June) for the second consecutive month which boost investor confidence. India VIX on the other hand, fell to a multi-month low of 10.82 which reduced the market volatility. The primary market was also in buzz last week with Ideaforge IPO getting subscribed more than 100x, while Cyient DLM IPO getting 67x subscriptions.
Global cues were also supportive where an upward revision in the US first-quarter GDP and a surprise fall in jobless claims helped ease some recessionary fears. However, China’s economic data (viz industrial production, retail sales, exports) continued with its weakness.
(The writer heads retail research at Motilal Oswal Financial Services Limited)