Sensex, Nifty end week in the green

Indian equity markets regained their last week losses with both Nifty and Sensex gaining 581 and 177 points respectively, up 1.1% each to end at 15860/52,925. The broader market too gained with both Nifty Midcap100/ Nifty Smallcap100 up 1.5% and 1.2% respectively.

Sectorally, it was a mixed bag with PSU Banks being the biggest gainer – up 5.4% followed by Metals 3.5%.

Private Banks, Financials, Auto and IT too rallied more than 2%, while Pharma gained 0.8%.

On the other hand, FMCG, Media and Energy ended with 1% losses.

FIIs turned net sellers after being consecutive buyer for four weeks in a row, having sold equities to the tune of Rs 2,700 crore while DIIs turned buyers to the tune of Rs 4,700 crore.

Global cues turned positive towards the end of the week after US President embraced a bipartisan Senate infrastructure deal and the US jobless data also showed the improvement. Otherwise, for most part of the week, sentiments were weak post US Fed’s hawkish statement in its MPC meeting, resulting in fear of tapering in global monetary stimulus.

Domestically, Bank Nifty turned positive after falling for two weeks in a row amid renewed privatisation talks and fund-raising by few banks. Metal stocks rallied after Russian government proposed new export taxes from August 1 on steel, nickel, aluminium and copper.

Reliance AGM was the key event during the week where the company's chairman Mukesh Ambani made a number of announcements on the company's energy, digital and retail business.

India VIX cooled down sharply by 9.7% from 14.8 to 13.4 levels, indicating an overall bullish market bias which can help move Nifty above 16k levels.

Earnings season for FY21 ended on a strong note with Nifty EPS growing at 14.2% YoY to Rs 539 – the highest since FY11.

We expect earnings momentum to accelerate in FY22 as the pace of vaccination has picked up and the economy opens up further.

Good monsoon so far also supported bullish sentiments.

Hence we expect the long term trend of the equity market to remain positive. Near term direction of the market would be determined by commodity price led inflation and its impact on interest rates.

(The writer is Head – Retail Research, MOFSL)