Post Market views - Oct 28, 2022 - Reliance Securities

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

Domestic equities closed higher following a positive cues in global markets on better GDP numbers from USA. Nifty gained 0.3%, while broader markets under-performed the main indices as Nifty Mid Cap and Nifty Small Cap fell 0.3% and 1% respectively. All sectoral indices ended in red except Nifty Auto (+1.6%) and Nifty Oil & Gas (+1%). Nifty Metal plunged the most at 1.5%, followed by Nifty Pharma and Nifty IT which fell 1.4% and 0.9% respectively. Meanwhile, data from the RBI showed banks borrowed Rs73,297 crore from the central banks through different LAF windows in a drastic change from the situation just five months ago in May when as much as Rs3.10 lakh crore was kept with the central bank in excess liquidity. Rising demand for loans has also made banks borrow from the central bank. Credit growth at close to 18% is almost double the 10% deposit growth. Moreover, strong 2Q results of Maruti Suzuki lifted Auto index in the second half of the session.

U.S. equities ended mixed after data showed that U.S. economy returned to growth path in the third quarter. The Dow Jones gained 0.6%, its fifth day in a row of gains. The S&P 500, meanwhile, fell 0.6% and the tech-focused Nasdaq Composite lost 1.6%. The yield on the 10-year Treasury note slipped to 3.94% from 4.0% on Wednesday. The U.S. economy grew at an inflation-adjusted annual rate of 2.6% in 3QCY22, snapping two quarters of contraction. Moreover, new figures showed that 217,000 workers filed for unemployment benefits in the week ended Oct. 22, up slightly from the week prior but still near historical lows. The European Central Bank raised interest rates by 75 bps and expects to raise interest rates further as it works to damp inflation.

The market fears that more rate hikes by the US Fed could again harden US Treasury yields which could further weaken the rupee. The 2QFY23 earning season so far witnessed healthy revenue growth but higher inflationary pressure took toll on profitability. Inflation continues to remain sticky, both, in the domestic and the US economy. India's growth remains strong and expected to be one of the fastest growing economies in the world, while global recession and downgrading of growth persisted for major economies. The market is looking at US Fed monetary policy meeting scheduled for 2nd November. Commentary on festive demand, inflation outlook and rate hike will be keenly watched in the near term.

Source : Equity Bulls

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