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This week, we expect the markets to continue their northbound journey with Nifty likely to scale new highs supported by healthy macros. Markets, on Monday, will react to India GDP data. Sectors like auto will remain in focus on the back of monthly vehicle sales numbers. On the economic calendar front, India, United States, United Kingdom and Euro PMI data will be released.
Last week, Nifty hit a new high of 25,268 following strong US economic data that reduced growth concerns, and persistent buying by Foreign Institutional Investors (FIIs). The index witnessed its 12th consecutive session of gains, the longest winning streak in nearly 17 years. It closed the week with gains of 413 points or +1.7 per cent at 25,236. This was driven by gains in defensive sectors such as pharma, IT, FMCG, auto, and realty stocks.
Niche sectors like sugar were in focus after the government’s new policy lifted the previous cap on using sugar for ethanol production. This policy change will enhance ethanol production and promote sustainable energy practices.
Metals saw buying interest following a surge in global prices after a fall in the dollar index and China halting approval of new steelmaking capacity.
Sentiments got a boost after Moody's upgraded India’s GDP growth forecast to 7.2 per cent for 2024 and to 6.6 per cent for 2025 on the back of broad-based growth and strong private consumption. Fitch Ratings affirmed India's 'BBB-' rating with a stable outlook, citing strong medium-term growth prospects and improving fiscal credibility.
The MSCI India index underwent a reshuffle on the last day of August, with an anticipated net passive FII inflow of $4-4.5 billion. Seven stocks, including Dixon Tech, Vodafone Idea, and Oil India, got added to the index. Bandhan Bank got excluded, resulting in an outflow of $117 million. Ambuja Cements saw two-way flows, with capital coming in from the FTSE index and exiting from the MSCI index. FTSE announced its rejig following Gautam Adani's sale of a 2.75 per cent stake in Ambuja Cements.
Focus during the week also remained on Reliance’s Annual General Meeting wherein the management reiterated its strategic vision for its four key businesses – Telecom, Retail, Oil to Chemicals, and New Energy. The company aims to double its EBITDA in the next five years, powered by 5G opportunities, increased investments in AI/data centers, further expansion in retail and the start of PV/battery facilities.
On the global front, the initial US GDP assessment showed that the economy grew last quarter at a healthy 3 per cent annual pace, fuelled by strong consumer spending and business investment. The second-quarter growth marked a sharp acceleration from a sluggish 1.4 per cent growth rate in the first three months of 2024.
Investors are optimistic about the US Federal Reserve policy rate cut following Jerome Powell's supportive comments and the central bank’s confidence in achieving its 2 per cent inflation target. This is having a positive rub-off on several domestic sectors like IT, Metals, and NBFC. Sectors with strong earnings growth like Insurance and pharma are also witnessing buying.
(The author is Head of Research, Wealth Management, Motilal Oswal Financial Services Ltd)