Domestic equities started the year 2024 on a sombre note, witnessing some profit booking after a rally of 13 per cent over the last two months. Q3FY24 earnings season will kick start from this week with Infosys and TCS reporting on January 11, followed by HCL Tech, Wipro and HDFC Life next day. We expect stock-specific action to gather pace with the start of the results announcement. On the economic calendar front, Consumer price index (CPI) data would be released from US, China and India along with US producer price index (PPI) data, which are also key data to monitor.
Last week, Indian equities traded in a broader range with Nifty ending 21 points lower (-0.1 per cent) at 21,711 levels. Broader market continued to outperform with Midcap100/Smallcap100 gaining 2.6 per cent/1.9 per cent. Impressive quarterly business updates from financial heavyweights, boosted investor sentiments and provided resilience to the market.
Real Estate was the biggest gainer and saw a sharp rally of 8 per cent on the back of strong pre-sales in Q3, healthy launch pipeline and expectation of strong numbers in Q3. It was followed by 2-3 per cent gains in pharma, PSU banks and energy stocks. Niche sectors like defence, railways, hotels too were in the limelight. Railway stocks rallied after the government announced scaling up production of Amrit Bharat trains. The auto sector on the other hand, saw some profit booking (down 1 per cent) post a mixed set of sales numbers that were released for the month of December. IT and metals fell 2% pursuant to rise in US bond yields.
Global cues have been weak since the start of New Year with the US Federal Reserve turning hawkish and hinting at delay in the rate cuts towards the end of the year. Even some of the economic data that got released were a little weak, hurting the sentiments. US and China’s manufacturing data saw a contraction. Markets today would react to non-farm payroll data that got released last Friday. Investors have also turned cautious given escalating tensions at Red Sea.
Domestic equities witnessed profit booking on the back of weak global cues and a fall in India’s PMI manufacturing to an 18-month low at 54.9 for December. However, India’s services PMI rose in December to 59.0 from 56.9 in November on the back of strong demand that spurred sales and fuelled business activity. Job creation extended into the 19th successive month, while business optimism strengthened.
After a brief pause, the IPO market is back in action, with five IPOs expected to open in January. Primary market saw huge attraction from investors in CY23 and we expect this momentum to continue in CY24 as well.
We expect the market to take cues from the quarterly results, leading to more stock-specific action. The market is likely to remain in a positive range with a gradual upward move on the back of strong flows, healthy macros and corporate earnings.
(The writer is Head – Retail Research, Motilal Oswal Financial Services Ltd)