Post Market views - March 16, 2023 - Reliance Securities

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

Indian equities ended a volatile session flat amid mixed global cues. Nifty ended 0.1% higher after recovering from its morning lows. Meanwhile, Nifty Mid Cap was up 0.1% and Nifty Small Cap was down 0.5%. Most sectoral indices ended in green except Nifty Metal (-2.6%) and Nifty IT (-0.7%). Nifty Media was the major gainer which was up 4.2% followed by Nifty Realty and Nifty FMCG which were up by 1.1% each. Meanwhile, CRISIL has projected a 100 basis points slower growth for the Indian economy at 6% amid a challenging global macroeconomic environment as against a likely 7% growth this fiscal in terms of real GDP. The projection for FY24 is lower than the RBI's 6.4% forecast.

U.S. equities ended mixed led by weakness in banking stocks as investors fled to the relative safety of the U.S. Treasury market. Credit Suisse led a rout in European banking shares and U.S. stocks before speculation that Swiss regulators might shore up the bank stoked a rebound. Credit Suisse is likely to borrow $54bn from the Swiss National Bank. The S&P 500 ended the day lower by 0.7% and Dow Jones was 0.9% lower while the Nasdaq reversed its losses, ending the day marginally in the green. The yield on benchmark 10-year Treasury was down as low as 3.391%, from 3.633% on Tuesday, before they rebounded to 3.485%. Efforts by U.S. officials and regulators to stop Silicon Valley Bank's collapse from spilling over into the financial system appeared to have stabilized markets on Tuesday. But the selloff in stocks and hunt for safe assets began again on Wednesday, showing that investors remain on edge about the potential for tremors in the global banking system. The markets will have their eyes on the ECB monetary policy meeting due later tonight.

Globally, the crisis in the US banking system has roiled markets with the banking sector coming under pressure across markets on fears of contagion. Markets are concerned over the health of the financial system reiterated by rating agency Moody's cutting its outlook on the US banking system from stable to negative. The collapse of Silicon Valley Bank following losses in its bond portfolio is the biggest bank failure since the global financial crisis and has sent shockwaves through the banking sector. The US CPI though lower, remains well above the Fed's 2% target. This coupled with the stronger than expected February jobs report implies continuation of the rate hiking cycle. The India Feb CPI at 6.44% was lower than 6.52% seen in January, but higher than consensus estimates of 6.30%-6.35%. Persistent cereal and milk inflation is a cause for concern and is likely to be on RBI's mind ahead of the next MPC meeting in April. The higher than normal temperatures and the forecast of unseasonal rains across large swathes of India are likely to impact crops which should keep food inflation higher in the coming months. The Feb WPI cooled down further to 3.85% from 4.73% in Jan and was also lower than the estimates. The WPI data suggests that some respite can be expected on the manufactured goods inflation in CPI in the coming months. Correction in Brent crude oil prices is a tailwind for the Indian economy.

Source : Equity Bulls

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