Post Market views - August 30, 2022 - Reliance Securities

Mr. Mitul Shah - Head of Research at Reliance Securities.

Indian equities closed higher, a day after it witnessed the worst single-day fall in more than 10 weeks amid a global sell-off. The Nifty increased 2.6%, while Nifty Mid Cap and Small Cap rose 1.9% and 1.3% respectively. All sectoral indices ended in green. Nifty Reality gained the most at 3.5% followed by Nifty Fin Service and Nifty Pvt Bank which were up 3.4% and 3.3% respectively. Meanwhile, GDP is estimated to rise 15.4% YoY in the three months to June according to a Bloomberg survey, recording the fastest reading since the April-June quarter of 2021 and compares with a 4.09 expansion in the previous three months. The Statistics Ministry is due to release the GDP data for Q1FY23 on Wednesday.

U.S. equities closed lower on FED chair Jerome Powell's hawkish comments in the Jackson Hole symposium last week. S&P 500 dropped 0.7%, Dow Jones lost 0.6%, while Nasdaq fell 1%. U.S. Treasury yields climbed as a selloff in government bonds, highlighting market unease at possibility of rate hikes in the near future. The 10-year Treasury yield rose to 3.109% from 3.034% on Friday. Meanwhile, the U.S. dollar index, touched 109.48 its highest intraday value since 2002.

The Federal Reserve will continue raising interest rates and hold them at a higher level until it is confident inflation is under control and at the 2% level. The RBI's rate setting panel is likely to opt for slowing down the pace of hikes and increase the repo rate by at least 25 bps in September. The central bank has already hiked the repo rate by 1.4% in three consecutive actions since May this year, in response to the high inflation which has been consistently breaching upper end of the tolerance band set by the government to the RBI. The Monsoon in India is ~8% above long-term average. India's retail inflation may be moderating after hitting a peak in April but there are some upside risks that will weigh on the RBI's as it decides the course of future rate hikes.

Source : Equity Bulls

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