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This week, domestic markets are likely to remain steady and consolidate at higher levels in the near term. Budget-related sectors are likely to remain in action on the back of news flow and expectation around growth focused policies. Sectors like fertilizer, gaming oil and gas and railways will react to the outcome of the GST council meeting, held over the weekend.
Globally, investors will react to United States GDP, manufacturing and services PMI data along with existing homes sales data on Monday. European markets will focus on the United Kingdom’s GDP and Euro inflation data announcement.
Last week, Nifty consolidated with a positive bias, with gains of 36 points (+0.2 per cent) at 23,501 levels. Action was seen in Smallcap100 which gained 1.1 per cent, while Midcap100 was up 0.4 per cent. Select IT, metals and private bank stocks provided support to the market, while the action largely shifted to mid and small cap sectors like fertilizer, sugar, rail, and PSU stocks.
Despite consolidation, Nifty soared to a new all-time high of 23,667 last week, well supported by foreign institutional investor inflows of Rs 13,000 crore. This, along with hopes of a Federal Reserve interest rate cut, rally in the global markets, and Indian government plans to continue reforms in the rural sector, kept the sentiments buoyant.
Highlights of the week included several block deals worth more than Rs 30,000 crore in Indus Tower, Gland Pharma, Sansera, ZF Commercial, Aster DM, etc among many other names.
IT stocks saw buying interest after Accenture reported strong booking in artificial intelligence. Fertilizer stocks saw a smart rally on expectations that the government may increase fertilizer subsidy in the upcoming budget reducing GST. Further, the centre significantly hiked Minimum Support Price (MSP) for 14 Kharif crops for the 2024–2025 season, with an aim to revive rural sentiment.
Metal stocks gained due to surging base metal prices on the London Mercantile Exchange, while tight global sugar prices lifted sugar stocks. Rail stocks saw buying interest after reports that the government may hike allocation to the sector to 39 per cent in the upcoming budget to improve the network. Defense stocks saw a lot of action on hopes that the government will push local players under Make in India for domestic defence manufacturing.
At the macro level, manufacturing and services PMI rebounded in June after a blip seen in May, thus limiting the downside. The services PMI rose to 60.4, while the manufacturing PMI climbed to 58.5 led by expansion in business activity.
Globally, Bank of England, People’s Bank of China and Bank of Japan kept their interest rates unchanged, while the Swiss central bank unexpectedly cut interest rates by 25 basis points to 1.25 per cent. Mixed set data releases kept the interest rate cut hopes high.
(The writer is head of Retail Research, Motilal Oswal Financial Services Ltd)