Mixed cues in store for markets

Indian equity markets snapped its last week gain to end marginally lower on the back of mixed global cues. Both Nifty/Sensex ended 67/164 points lower (-0.4%/-0.3%) to close at 15,856/52,976.

The broader market too ended lower with Nifty Midcap100/ Nifty Smallcap100 down -1.0%/-0.4% respectively. Majority of the sectors ended in red, with banks, Financials, Auto and Media down 1.6-2.6%.

Metals, Energy and Pharmaceuticals too ended marginally lower while Infra ended flat.

On the other hand, IT was the biggest gainer – up 1.7%, followed by Realty and FMCG which gained almost 1% each.

Foreign Institutional Investors (FIIs) continued to be net sellers for the fifth week in a row, having sold equities to the tune of Rs 5,500 crore whileDomestic Institutional Investors( DIIs) were buyers to the tune of Rs 5,000 crore.

Global cues were mixed as on one hand, surging Covid delta variant cases, fear of possible lockdown and impact of rising inflation on economic recovery continue to worry the market.

On the other hand, robust corporate earnings and renewed optimism about the economic recovery uplifted sentiments in the latter part of the week.

Even the ECB accommodative policy statement that the interest rates would stay at their current record low levels until it sees inflation “durably” reaching the bank’s new target of 2%, cheered the market.

Domestic factors remained positive on account improved Inflation data, good quarterly results and decline in oil prices by ~10% in the last couple of days.

However, continued FIIs selling and weak global cues have had a negative impact in the domestic market.

QSR companies like Jubilant Food, Burger King, Speciality Restaurants and Westlife Development were in focus this week post strong results and commentary from Jubilant as well as Zomota’s listing on Friday.

Zomato made a stellar debut on the bourses at 53% premium and entered in Top 100 listed companies in value terms, with a market capitalisation of over INR1 lakh crore.

In the coming week, Markets will first react to results of three major companiesReliance Industries, ITC and ICICI Bank on Monday whose weightage in Nifty is ~20%. It will track global cues for further market direction.

The first qaurter result season has so far been in-line to better than expectations - leading to sector and stocks specific action - which is likely to continue in the near term as well.

Also it may provide investors with some insights into the scale of economic recovery through the management commentaries.

Overall, Indian equity markets have shown strong resilience even though it faces headwinds from the advent of a possible third Covid wave and persistent inflation readings prompting a potential rate increase.

Positive macro data points both on global and domestic front is giving confidence to the investors of faster economic recovery.

While declines are being bought into, follow up is missing at higher levels.

Bulls would need a lot of strength to take the Indian stock market to newer highs above 16,000 mark.

(The writer is Head-Retail Research at MOFSL)