Mr. Mitul Shah - Head of Research at Reliance Securities.
Domestic equities closed higher following positive global cues, led by broad-based gains across sectors. The Nifty rose 1.1%, while broader markets out-performed the main indices as Nifty Mid Cap and Nifty Small Cap gained 1.3% and 1.1% respectively. All sectoral indices ended in green. Nifty Healthcare gained the most at 3.4% followed by Nifty Pharma and Nifty Consumer Durables which were up 3.1% and 2.1% respectively. Bank deposit rates are likely to go up further as credit growth is outpacing the deposit growth by a wide margin. As of 26th Aug, system-level credit growth stood at 15.5% as against 9.5% on the deposit front.
U.S. equities closed higher despite a negative start as markets awaited the Federal Reserve's interest-rate decision. The S&P 500 gained 0.7%, snapping a two-session losing streak. The Dow Jones advanced 0.6%, while Nasdaq rose 0.8%. The yield on the 10-year U.S. Treasury note rose to 3.489%, from 3.447% on Friday. There is 82% chance that the Fed will raise interest rates by 75bps, and a 18% chance that the U.S. central bank will lift rates by 100bps.
The recently released US inflation data has confirmed that the inflation print would force the US Fed to increase its pace of rate hikes. While both the US Fed and India's RBI have taken a hawkish stance to fight against the simmering inflationary pressure, the macroeconomic uncertainties are going to intensify the market going ahead. India is trading at a premium valuation compared to emerging markets on high growth expectations. We expect the outperformance to continue given the FII investments and strong macros for the Indian economy. We expect strong economic rebound and better visibility in the near term.