Equity markets ended in the green for a second consecutive week amidst heightened volatility. Nifty rose by 86 points (0.5%) while Sensex rose by 599 points (1%) to close the week at 16,352/54,885 levels.
Broader market, however, underperformed with Nifty Midcap100, down 0.8% and Nifty Smallcap100, down 3.4% during the week.
Sectorally, it was a mixed bag. Financial services, banking and autos gained in the range of 3-4% each while metals, realty and pharma were top laggards.
Metals witnessed sharp decline of around 8% during the week after the government imposed an export ban on steel and iron ore products.
Sugar sector stocks also witnessed some selling pressure after the export ban. FIIs continued with their selling, having sold equities worth more than Rs 7,700 crore (data till Thursday) while DIIs were buyers to the tune of Rs 8,500 crore (data till Thursday).
On the global front, minutes from the Fed gave the much needed relief to the market. The minutes suggested that policymakers are likely to raise interest rates by 50 bps – in-line with market expectation in its next couple of meetings. This lifted the investor’s sentiments in an otherwise cautious environment.
Back home in India, the government announced various steps to control inflation, during the week. In its attempt, it imposed restrictions on various export related products like steel, sugar, plastics, wheat.
Further, RBI released its annual report on May 27 which suggested that the Indian economy is likely to bounce back despite global risks. It further highlighted, substantial increase in government capex outlay could crowd in private investment and improve aggregate demand.
After witnessing wild swings during the week, markets showed some respite in the last two days helped by short covering on monthly expiry as well as support based buying in heavyweight counters.
Overall Nifty has seen good recovery from lows of 15,800 levels. However it needs to surpass previous hurdles at around 16,400 zones, above which we can see a fresh rally in markets.
Also many Nifty stocks have declined 15-20% and offer attractive entry opportunity. We are positive on selective stocks from banking, auto and IT sectors.
Investors can look at stocks from these space which are better placed with strong results and accumulate them gradually from long term perspective.
(The writer is Head-Retail Research at MOFSL)