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Market Commentary
Post Market views - Sep 30, 2022 - Reliance Securities
Posted On : 2022-09-30 23:10:14( TIMEZONE : IST )
Mr. Mitul Shah - Head of Research at Reliance Securities.
Indian equities closed higher post the RBI's MPC policy announcement with 50bps repo rate hike, in line with expectation and governor's positive commentary on India's growth prospects. The Nifty climbed 1.6%, while broader markets out-performed the main indices as Nifty Mid Cap and Nifty Small Cap rose by 1.9% and 1.6% respectively. All sectoral indices ended in green. Nifty PSU Bank gained the most at 3%, followed by Nifty Pvt Bank and Nifty Bank which were up 2.8% and 2.6% respectively. Banking stocks were the primary driver for the rally as the RBI hiked interest rate by 50bps, which was in-line with the market's expectations. The repo rate now stands at 5.9%. Overall, the RBI has now raised rates by 190 bps since May.
U.S. equities closed lower following higher bond prices and fear of global slowdown. The Dow slid 1.5%, S&P 500 dropped 2.1%, while Nasdaq was down 2.8%. The three indexes finished their 2022 closing lows. The U.S. economy shrank at an annual rate of 0.6% 2QCY22, confirming previous estimates. Mortgage rates rose to 6.7%, their highest level since 2007. The 10-year U.S. Treasury yield rose to 3.747%, up from 3.707% Wednesday.
The US and Europe are all headed towards a recession, while India in all likelihood to prevent it very well. The market given positive response to the commentary on India's growth impulses and projection of 7% GDP growth with 6.7% inflation for FY23. Indian currencies remain strong vs other markets, all currencies have depreciated against the USD. The Indian Rupee depreciated 7.4% YTD FY23 while Dollar index has appreciated 14% over the same period. The depreciation of the rupee is less than all other currencies led by strong macros of India. This is also evidenced in significant FPI inflows in last three months. Going forward, the key events for the markets includes - inflation forecast, Comments on external balance sheet, the tone of the policy statement and path on rate normalization.
