US Inflation BoE among key factors to dictate markets

The weak ahead

Money or currency exchange rate on board, display or monitor - selective focusMoney or currency exchange rate on board, display or monitor

This week, Nifty is likely to take a pause and consolidate around 18,000-18,200 zones, especially after a sharp rise seen over the last few days. While the overall market structure remains positive, expect Nifty to be range bound in the near term on the back of subdued global cues and profit booking in index heavyweights.

The IPO of Mankind Pharma which had hit the primary market in April end is getting listed on bourses this week. It is now being followed by IPO of Nexus Select Trust which would open for subscription on May 9 and the company has set a price band of Rs 95 to Rs 100. This week the stage is also all set for the state assembly election with the Karnataka election due on May 13. On the economic calendar front, the market would watch out for inflation data of India, US and China along with UK GDP data and BoE interest rate.

Nifty continued with its strength for the second consecutive week on the back of healthy corporate earnings, robust domestic macro data points and return of FIIs. However, it witnessed profit booking on the last day on account of weak global cues and profit booking in banking largely led by HDFC twins, thus erasing all its gain for the week and finally ending on a flat note at 18069 levels. The broader market continued with their outperformance as Nifty Midcap100/Nifty Smallcap100 gained 1.1 per cent/0.6 per cent for the week.

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Global cues got weak as both US Fed and ECB in their recent policy meeting last week raised interest rates by 25bps. While the US Fed was indecisive with regards to the rate hike pause; the European Central Bank did not give any signs of ending. This apart banking crisis continues in the US adding further to the concerns. However, on the domestic front, macro data points were encouraging with India’s manufacturing PMI data at a four month high in April and GST collection up 12 per cent to a record high of Rs1.87 lakh crore, thus providing strength to the market.

Further with global uncertainties, the brent crude oil price has now fallen to below $75/barrel. This is benefitting India and sectors like aviation, fast-moving consumer goods (FMCG), paints and tyre companies saw momentum as crude being their key raw material. Apart from these, FIIs have turned big buyers over the last six trading sessions and bought more than Rs10,000 crore.

Corporate earnings too have been healthy and in line so far with decent number of companies either meeting or exceeding profit expectations. However, the growth is being led by BFSI, Technology, and O&G, while Metals, Healthcare, and Telecom recorded a YoY earnings decline for the quarter.

(The writer heads Retail
Research at Motilal Oswal Financial Services Limited)