Post Market views - Feb 17, 2023 - Reliance Securities

Mr. Mitul Shah - Head of Research at Reliance Securities

Indian equities ended lower following weak global cues. Nifty closed 0.5% lower while Nifty Mid Cap and Nifty Small Cap were down 0.8% and 0.6% respectively. Financial sector was the worst performer with the Nifty Pvt Bank , Nifty PSU Bank and Nifty Bank all correcting more than 1.5%. Nifty IT (-1.2%), Nifty Metal (-0.9%)and Nifty Realty (-1.8%) were the other laggards. Nifty FMCG with a modest 0.3% cut was a relative outperformer.

The U.S. stocks fell sharply on Thursday after another hot inflation report and a decline in jobless claims, showed the economy is holding up amid the Federal Reserve's rate hikes. The S&P 500 closed 1.4% lower and the Dow Jones fell 1.3%. The tech heavy Nasdaq ended lower by 1.8%. US Producer Price Inflation (PPI) rose 0.7% MoM in January, higher than estimates of 0.4%. This coupled with the lower than expected jobless claims and the strong CPI and retail sales data have increased the probability of further rate hikes by the Fed. 10-year Treasury yields climbed to 3.9% from 3.808% on Wednesday.

The aggregate results for the sample of NSE 500 companies so far has seen Revenue/EBITDA/PAT growth of 19%/ 11%/ 5% YoY. Profitability has been under pressure due to elevated raw material costs on a YoY basis. RM costs though have cooled off on a QoQ basis leading to improvement in gross margins. PAT growth has been impacted due to higher finance costs on the back of increase in interest rates. After dipping for two months, India's retail inflation surged in January to 6.52%, above the RBI's tolerance band of 2-6%. A surge was expected due to an unfavourable base effect from last year. But January's 6.52% rise against 5.72% in December was much higher than expected, partly fuelled by rising food prices. Food inflation was up 5.94% vs 4.2% in December. On the other hand, WPI eased to a 24 month low in January at 4.73% YoY vs 4.95% last month. This indicates moderating supply side pressures and should help in cooling down CPI in the coming months.

Source : Equity Bulls

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