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Indian markets have shown resilience despite several global headwinds, gaining 0.5 per cent for the week. This week we expect markets to remain in a broader range with positive bias on the back of strong economic data, along with expected healthy corporate earnings.
Investors will watch out for some key economic events like US Federal Reserve chairman Jerome Powell’s speech along with US homes sales, retail sales and industrial output data for further cues. Even China would be announcing its Q2 GDP numbers while inflation data would be released from UK and Europe. On the domestic front, India’s wholesale inflation will be released.
Last week, Nifty ended the week with gains of 98 points (+0.5%) at 19,751 levels. Broader markets too ended on similar lines with gains of 0.5 per cent across midcaps and smallcaps. Real estate was the biggest gainer with rise of more than 4 per cent post strong earnings updates by major players and buoyant industry outlook. Autos were up almost 3% post strong September sales volume numbers, and on expectation of robust earnings reports from the sector.
PSU banks on the other hand saw profit booking and fell more than 3 per cent. IT too fell almost 2 per cent after weak results were announced by IT heavyweights.
Despite uncertain global cues, domestic equities were resilient as investor sentiments were buoyed after the International Monetary Fund raised India's FY24 GDP growth forecast to 6.3 per cent from 6.1 per cent. In addition, strong economic data released during the last week along with robust quarterly business updates from several corporates also boosted confidence.
India witnessed double good news of lower inflation and higher industrial output data, which reached a 14-month high. Going forward, we expect core inflation to ease gradually toward 4 per cent by March 2024, though headline inflation may stay around 4.5-5 per cent. With another 5 per cent month-on-month fall expected in vegetable prices in October 23, headline inflation could be ~4.5 per cent. IIP is expceted remain strong over the next few months, supported by a favorable base effect and the onset of the festive season.
July-September quarter earnings season started on a subdued note with IT Majors TCS, Infosys, and HCL Tech reporting weak results. However, management across Tier I companies expect FY25 to see growth revival given the healthy deal wins. Overall we expect robust 21 per cent earnings growth for Nifty in Q2, which would be driven by domestic cyclicals. So lot of stock specific action would be seen over next 45 days as the earnings get declared.
Investors this week would react to the results of DMart announced over the weekend along with HDFC Bank to be released on Monday. Other heavyweights like Bajaj Finance, Wipro, and Hindustan Unilever would also be releasing their results during the week.
On the global front, a flare-up in the military conflict between Israel-Hamas led to geo-political uncertainties and flare up in crude oil prices. In the near term, markets would continue to take cues from the global events and ongoing Q2 results. Nifty might continue with its consolidation with bouts of volatility as it would track geo-political developments, US bond yields and oil prices amidst result announcements.
(The writer is Head – Retail Research, Motilal Oswal Financial Services Limited)