Pre-Market views - June 6, 2022 - Reliance Securities

Mr Mitul Shah, Head Of Research at Reliance Securities.

U.S. equities closed lower for the week with S&P 500 dropped 1.2%, the Dow Jones fell 0.94%, while the Nasdaq declined 0.98%. In bond markets, the yield on the benchmark 10-year U.S. Treasury note ticked up to 2.955. Federal Reserve officials are closely monitoring the state of the labor market as they decide how much and how quickly to raise interest rates in the coming months. U.S. witnessed the slowest pace of job growth since April of last year, while the unemployment rate remained 3.6%. Wages grew 5.2% on the year, down from 5.5% in April. A tightening of financial conditions by the Fed might damp inflation but investors remain wary on growth and the housing market. Russia's war against Ukraine and China's zero-Covid policy have added to supply-chain disruptions, further stoking inflation.

For the week domestic equities ended in green as Nifty was up 1.4%. Broader markets outperformed the main indices as Nifty Mid-Cap and Nifty-Small Cap gained 1.6% and 4.4% respectively. Most sectoral indices for the week were in green as, Nifty Reality witnessed the highest gained at 4.9%, followed by Nifty Oil&Gas which was up 3.94%. Nifty Healthcare was the major laggard which declined 2.5% followed by Nifty Pharma which was down 2%.

The Indian economy's growth moderated to 4.1% in 4QFY22, while the growth rate of real GDP for FY22 has been pegged at 8.7%. India's GDP had contracted by 6.6% in FY21. The GST revenue for the month of May stood at Rs1,400bn, up 44% YoY. Moreover, while India's merchandise exports rose by 15.5% to $37.3bn in May on account of healthy performance by sectors like petroleum products, electronic goods and chemicals, the trade deficit widened to $23.3bn during the month. 4QFY22 reported strong performance despite inflationary pressure. Revenue of BSE500 for 4QFY22 grew by 22% YoY while PAT grew by 25% YoY. The RBI Monetary Policy Committee will meet on June 6-8, the Committee is widely expected to hike interest rates. The week will also see the meetings of the European Central Bank (ECB) and the Reserve Bank of Australia. The monsoon rain has arrived in India. The India Meteorological Department has forecast a normal monsoon season for 2022, stoking hopes of a healthy crop season. The main focus for the next week would be on the Reserve Bank of India's interest rate decision on June 8. The Indian equities will likely see another tumultuous week as the central bank would take its strict stance in an attempt to curb inflationary pressures.

Investors are still attempting to gauge the market's trajectory as global markets have also remained volatile due to FED's upcoming policy decisions and the Russia-Ukraine crisis which is affecting supply chain and logistics. The main focus for the next week would be on the Reserve Bank of India's interest rate decision on June 8. The Indian equities will likely see another tumultuous week as the central bank would take its strict stance in an attempt to curb inflationary pressures. RBI is looking at another phase of coordinated action between fiscal and monetary authorities. And all eyes are on RBI and the US Fed in which further rate hike is expected. The primary focus will be on central banks' policy measures to stabilize inflation. Changes in oil prices and amendments to import and export duties might play a role in assessing the movement of the market next week. The continued selling by FIIs and plunging rupee are likely to have economic implications in the near term. Globally, the Russia-Ukraine crisis and supply chain disruptions continue to impact global and Indian equities.

The markets are likely to see gap down opening as SGX nifty is 84.05 points lower compared to its previous spot Nifty closing. Asian Markets are trading in green as, Nikkei is up 0.3% while Heng Seng is up 0.6%.

Source : Equity Bulls

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