Post Market views - August 5, 2022 - Reliance Securities

Mr. Mitul Shah, Head Of Research at Reliance Securities.

Indian equities closed largely flat amid mixed global cues with Nifty climbed 0.09%, while Nifty Mid Cap rose 0.2% and Nifty Small Cap fell 0.06%. Sectoral indices ended mixed. Nifty IT gained the most at 0.6% followed by Nifty Bank which was up 0.4%. Nifty Auto was the major laggard which was down 1.1%, followed by Nifty Consumer Durables which plummeted 1.1%. Meanwhile, the RBI hiked interest rates by 50bps to curb rising inflationary pressures, higher than investors' expectation of up to 35bps. Repo rates now stand at 5.40%, which is above the pre-pandemic level of 5.15%. However, the central bank today left inflation forecast for the country unchanged at 6.7% for FY23. On a positive note it maintained FY23 GDP growth at 7.2%, which gave comfort to investors.

U.S. equities ended mixed with S&P 500 fell 0.1%, Nasdaq rose 0.4% while Dow Jones dipped 0.3%. The yield on 10-year Treasury notes fell to 2.674% on Thursday from 2.747% on Wednesday. Markets sentiments were further dampened after the Bank of England forecasted a prolonged recession in the U.K. The number of people applying for unemployment benefits rose to 260,000 at the end of July, up by 6,000 from the previous week. The Bank of England raised interest rates by the most in 27 years on Thursday. Reeling from a surge in energy prices caused by Russia's invasion of Ukraine, the BoE's Monetary Policy Committee voted 8-1 for a half percentage point rise in Bank Rate to 1.75%.

The S&P Global India Services PMI eased to 55.5 in July from 59.2 in June, showing slackness in the services sector. Food inflation continues to be a major concern as progress of monsoons is slowing. Total rice planted area has declined 13% so far this season due to a lack of rainfall in major areas. Commodity prices have started softening and overall retail inflation has mitigated. The Russia-Ukraine war continue to play a key role in affecting global markets. Concerns of depreciating rupee, widening trade deficit, FII selling and volatility in global crude prices still remain. However, we expect strong economic rebound, normalized commodity prices, inflation within a targeted range and better visibility in 2HFY23.

Source : Equity Bulls

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