Markets’ momentum to continue ahead of India GDP data

This week, the markets, after touching a fresh new high, are likely to consolidate ahead of various global economic data releases. India will be releasing its October-December quarter gross domestic product numbers, and so will the United States.

The US will also release initial jobless claims, personal consumption expenditure data and consumer confidence for the month of February along with actual PMI data and new home sales data for month of January. Europe will be announcing its GDP and retail inflation data too.

Last week, Nifty touched fresh highs for 5 consecutive days on the back of strong results and outlook shared by the world’s largest chip maker, Nvidia. Nifty finally ended the week with gains of 172 points (+0.8%) at 22,213 levels. Broader market, however, ended on a mixed note with Nifty Midcap100 up +0.3% while Nifty Smallcap100 fell marginally by -0.1%.

Majority of sectors ended in green barring IT, PSU Banks and Energy. Realty was the biggest gainer with gains of 4% followed by FMCG, Infra, Financials, Auto and Pharma.

Upbeat global sentiments led to US, Europe and Japan markets touching record highs. Investors took positive cues from Nvidia results and buying interest was seen in growth and technology stocks. Market somewhat ignored hawkish tone coming from US Federal Reserve meeting minutes, where the chairman flagged concerns over early rate cuts.

Higher than-expected US inflation raised the possibility that the Fed could hold rates higher for a longer period. But the economic data releases point that the US economy is still going strong. The People’s Bank of China has also cut the five-year loan prime rate (LPR) to 3.95% from 4.2% as a part of stimulus to recover the staggering economy. This too somewhat added to the cheerfulness.

On the domestic front, HSBC Flash India PMI data released for the month of February pointed towards India’s economic activity – both manufacturing and services being at a 7-month high which helped Indian markets to make a sharp recovery. However, the hawkish tone of the Reserve Bank of India in its meeting minutes somewhat dented sentiments.

Overall we expect this ongoing positive momentum to continue with markets attaining new highs, supported by strong domestic institutional investor buying. We expect it to strengthen further as the prospect of a pre-election rally is quite strong. Thus we recommend investors to continue with buy on dips strategy.

(Siddhartha Khemka is Head – Retail Research, Motilal Oswal Financial Services Limited)