Post Market views - Feb 21, 2023 - Reliance Securities

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

Indian equities ended lower led by broad-based losses across sectors. Nifty ended 0.6% lower. The Nifty Midcap was up 0.1% while Nifty Small Cap was down 0.3%. All sectoral indices ended in red except Nifty IT (+0.5%) and Nifty Auto (+0.3%). Nifty Oil & Gas, Nifty PSU Bank and Nifty Bank were the major laggards which plunged ~1.1% each.

U.S. stocks closed mixed on Friday as stubbornly high inflation and a rebound in rates continued to weigh on investor sentiment. Dow Jones closed 0.4% higher while the S&P 500 and Nasdaq fell 0.3% and 0.6% respectively. 10 yr yield ended at 3.82%, lower than 3.93% seen on Friday. US CPI for January rose 6.4% YoY, lower than 6.5% in Dec but higher than estimates of 6.2%. Retail sales rose 3% in January, bouncing back from recent declines as jobs growth accelerated. US Producer Price Inflation (PPI) rose 0.7% MoM in January, higher than estimates of 0.4%. Weekly initial jobless claims were also lower than expectations. All these indicators point to a strong US economy which will prompt the Fed to keep hiking rates to tame the stubbornly high inflation. The US markets will be shut today on account of President's Day.

The 3Q earnings season has ended and 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%. 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. The January trade deficit narrowed to $17.75bn from $23.76bn in December.

Source : Equity Bulls

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