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This week, domestic equities are likely to remain in a broader range, given mixed global as well as domestic cues. Market would react to strong India manufacturing PMI data which came in at three-month high of 58.6. Even US and Europe manufacturing PMI data along with US non-farm payroll data that got released last Friday would have a bearing on the market.
On the economic calendar front, Services PMI data will be on radar for India, US, Europe and UK. Europe, Japan and Australia would announce their Q2 GDP numbers, while US would release its non-farm payroll data for Q2. China would release its inflation and trade numbers which would also be important data to track this week.
Last week, Nifty mostly traded sideways and ended with marginal gains of 170 points (+0.9%). Broader market outperformed with Midcap100 and Smallcap100 up 2.5% and 4.4% respectively. Execution of several block deals and increasing participation in mid cap IPOs helped drive heightened activity in the broader market. Overall, for the month of August, Nifty closed lower with a loss of -1.5%, while Nifty midcap 100 and Nifty smallcap 100 were up 4-5% each.
India GDP for April-June came in at a four-quarter high of 7.8% versus 6.1% in January-March quarter. Better private consumption (at 6% Y-o-Y v/s our expectations of 3.5%) and investments (7.1% v/s expectations of 4.7%) led to better than expected growth, while it was offset by weak fiscal consumption and real exports. Overall, GDP growth remained robust led by higher domestic demand which boosted sentiments and pulled market upwards on the last day of the week.
Among sectors, hotel stocks were in momentum last week, following reports of a 106% Y-o-Y surge in number of foreign tourists arriving in India during Jan-Jun’23. Also, various global events that are to be held in India (G20, ICC Cricket World Cup, etc), is likely to support the demand in the hotel industry going forward. Metal and speciality chemical sectors gained buying interest after China announced a stimulus to support the economy which revived the commodity prices in global market.
Upstream oil companies were in the limelight as Brent crude surged to a 1-month high on the back of tighter US inventories and Russia signalled to curb oil export. Railway stocks logged smart gains on the back of strong order book and rising allocation in the rail infrastructure. Banks stocks saw fresh buying after rating agency Fitch affirmed ratings on India’s PSU Banks. However, FIIs were persistent seller, having sold more than Rs 20,000 crore in August. Even monsoon has been disappointing with 10% deficit in August, raising inflationary concerns.
(The author is Head – Retail Research, Motilal Oswal Financial Services Limited)