Global cues to drive markets next week

Equity markets continued with gains for the second consecutive week on the back of strong economic data. Nifty/Sensex rose by 232/885 points (~+1.4 per cent/+1.6 per cent) to close the week at 16,584/55,769 levels.

Broader market too increased with Midcap100 gaining 1.3 per cent while Smallcap100 outperformed with gains of 4.4 per cent during the week. The recently beaten down sectors like realty, IT and media gained 4-5 per cent while banking, financials and pharma were among the losers.

The selling intensity of FIIs reduced this week with flows turning positive also on one day. They sold equities worth Rs 3,000 crore (data till Thursday) while DIIs were buyers to the tune of Rs 4,500 crore (data till Thursday).

Global markets were mixed on the back of increasing geo-political developments in Europe and the resultant spike in crude oil prices.

Oil prices corrected a little but failed to steady at lower levels despite oil-producing nations decided to boost some output. Investors are also cautious ahead of release of US jobs data for May.

On the domestic front, better than expected GDP data, strong PMI data and robust GST collection helped markets sustain its recovery. India’s GDP clocked a strong 8.7 per cent growth in 2021-22 while for Q4 the growth stood at 4.1 per cent vs expectation of 3.9 per cent. Services PMI in May too expanded to 58.9 in May, strongest rate in over 11 years.

GST collection remained above Rs 1.4 lakh crore for three months in a row. Even Auto monthly sales data showed sequential improvement thus reflecting sector is gradually improving.

However, depreciation in rupee and rising bond yields somewhat dampened the sentiments. India’s 10-year bond yield touched a three-week high at 7.46 per cent during the week, on the back of rise in global crude oil prices after the EU agreed to slash oil imports from Russia.

The market’s base is gradually shifting upward despite witnessing selling pressure at every rise. It has managed to stay above the crucial support of 16,400 which should act as a strong base for the market now.

Persistent worries on rising interest rates, elevated crude oil prices and liquidity tightening are however keeping the upside in check. Markets are likely to remain in a broader range as we continue to monitor global cues including geo-political developments, crude oil price movement as well as institutional flows. RBI’s monetary policy meeting next week will be a key event that will be tracked by investors. Apart from this PMI data for US and UK would also be eyed.

(The writer is Head-Retail Research at MOFSL)