Equity indices touch lifetime high encouraged by US Fed statement

Indian equity markets touched new lifetime high during the week encouraged by positive US Fed statement and encouraging macro data points. Both Nifty/Sensex ended 234/754 points higher (+1.5%/+1.4%) at new all-time high closing of 15,923/53,140.

The broader market too touched new life time highs during the week with Nifty Midcap100/ Nifty Smallcap100 surging +1.7%/+4.2% higher.

Except media (-1.3%) and PSU Banks (-0.3%), all other sectors ended in green.

Realty was the biggest gainer – up +8.6% followed by IT, Infra, metals, private banks, financials and pharma which were up in the range of +1.8% to +2.6%.

FIIs continued to be net sellers for the fourth week in a row, having sold equities to the tune of Rs 2,700 crore while DIIs were buyers to the tune of Rs 3,210 crore.

Global cues were mixed. On the positive side, US Fed said that it would maintain it accommodative monetary policy despite U.S. inflation showing its biggest hike in last 13 years.

Market also cheered China’s central bank announcement of 50 basis points cut in its reserve requirement ratio which would boost liquidity.

In addition, China’s macro data points announced during the week came in better-than-expected including China’s GDP and Industrial Output data. However, rising Covid cases continue to make investors cautious with keen eye for cues from the ongoing result season.

In addition, the Bank of Japan kept its policy settings intact but downgraded its growth forecast for current fiscal marginally to 3.5%-4%.

On the Domestic side, market sentiment got boosted on account of better than expected economic data such as CPI/WPI inflation and IIP data and robust start to the earnings season.

Q1FY22 earnings season started on a positive note with IT majors reporting robust performance and increasing their growth guidance, which gave confidence to the investors about the economic health improving. Realty stocks gained the most during the week as the demand showed revival with gradual opening up of the economy, and the inventories are at all-time low while the companies are being able to take price action following pick-up in demand.

Metals stocks also came in limelight after China makes move on wider steel output cuts and US based Aluminum major Alcoa posted record earnings and increased their shipment forecast.

Technically Nifty formed a Bearish candle on daily scale. However it formed a Bullish candle on weekly frame with supports gradually shifting higher for the next leg of rally.

Now, it has to hold above 15,900 zones to witness an up move towards 16,200 levels while on the downside support exists at 15,750 levels.Equity market is cheering positive macro data points both on global and domestic front which is giving confidence to the investors of economic rebound.

Also progress on the vaccination drive is boosting sentiments. Market so far has been showing strong resilience even though it faced several headwinds. Q1FY22 earnings season has started off on a strong note and is providing support to the market.

Since restrictions this time around was localized and less stringent v/s the lockdown in CY20, the impact in 1QFY22 seems to be contained.

We expect earnings momentum to accelerate in FY22 as the pace of vaccinations picks up and the economy opens up further.

Next week key events, market would react to includes China’s monetary policy and ECB Bank Lending survey.

(The writer is Head – Retail Research at MOFSL)