Post Market views - Feb 22, 2023 - Reliance Securities

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

Indian equities ended lower amid weak global cues and strong sell-off across sectors, post Putin's adverse statement and threatening on war escalation. Nifty ended 1.5% lower. Broader markets too bore the brunt with Nifty Midcap and Nifty Small Cap down ~1.1% each. All of sectoral indices ended in red. Nifty Metal was the major laggard, down 2.6% followed by Nifty PSU Bank and Nifty Media which were down ~1.9% each, while Nifty Fin Service and Nifty Bank plunged 1.8% and 1.7% respectively. The crisis in Adani Group stocks worsened as all 10 stocks faced selling pressure. Since the release of the Hindenburg report on January 25, Adani group stocks have lost 60% of their value. Globally, geopolitical instability persists as Russian President Vladimir Putin asserted that his war against Ukraine will not end any time soon. Russia also suspended its nuclear treaty with the US.

U.S. stocks tumbled led by growing concerns that the Federal Reserve will keep interest rates higher for longer. Dow Jones fell 2.1%, while the S&P 500 also declined 2% and the tech-focused Nasdaq dropped 2.5%. The yield on the 10-year U.S. government bond rose to 3.957%, up from 3.827% on Friday. Meanwhile, the unemployment rate was 3.4% last month, its lowest level since May 1969. Wage growth continued to soften, despite the strong job gains. Average hourly earnings grew 4.4% in January YoY, down from a revised 4.8% in December. December job growth was also stronger than previously estimated, pushing the average job gains for the last three months to 356,000, well above the 2019 pre-pandemic average of 163,000.

The 3Q earnings season has ended and the aggregate results for the sample of NSE 500 companies saw Revenue/EBITDA/PAT growth of 19% / 11% / 5% YoY. Profitability was 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 was impacted due to higher finance costs on the back of increase in interest rates. With a slew of macroeconomic data released recently, the markets will now closely focus on the geopolitical developments on the Russia-Ukraine front for further cues.

Source : Equity Bulls

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