Inflation data, Adani flagship firm results to move markets

This week, key economic events will include retail inflation data - both, for the US and India - scheduled to be announced on Tuesday. Companies such as Adani Enterprises, Grasim, Eicher Motors, SAIL, among others, will announce their quarterly results during the week.

Earning season is now nearing its end with a majority of companies having announced their results. The spread of earnings has been decent with 65% either meeting or exceeding profit expectations. However, the growth is being led by BFSI and Autos, while Metals, Oil & Gas and Cement recorded a year-on-year earnings decline for the quarter.

Going ahead, the worry continues with regards to inflation and interest rate hike globally. Furthermore, the persistent FII selling and mixed set of corporate results would keep the market lacklustre as investors await fresh triggers for direction. Valuations are in the fair value zone with Nifty trading at 17.5-18.0x FY24E P/E, and thus offering room for upside if the corporate earnings delivery continues.

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With the week marking the end of the corporate earnings season, a lot of stock-specific action would continue in mid and small caps. In terms of economic calendar, EU GDP data and US inflation data would be the key global events to watch out for.

Last week, domestic equities witnessed a volatile period on account of the recent hawkish commentaries from US FED officials and weak earnings from the last set of corporates. Nifty ended the week flat at 17,857 levels. The broader market ,however, ended on a positive note with Midcap 100/Smallcap 100 up 2.1% and 1.2%, respectively. Metal stocks were the biggest losers on account of a poor set of numbers from Tata Steel and Hindalco. E-Platform companies were in the limelight after Paytm reported operating profitability much earlier with its guidance and other companies commenting on improving profitability, going forward. Heavy FIIs selling has been one of the major overhang for Indian equities. After selling of over Rs 40,000 crore in Jan’23, FIIs have offloaded securities worth nearly Rs 7,000 crore in February so far.

Global sentiments were dented on account of mixed commentaries from various Fed officials, which led to fears of a prolonged US Fed rate hike cycle. This, along with a tight labour market led to surge in treasury yields, especially short-dated bond yields.

On the domestic front, the RBI announced 25bps rate hike to 6.5% but gave a less hawkish commentary, which somewhat cheered the market. This is the sixth rate action by the RBI in FY23, wherein the RBI has hiked the repo rate by 250bps cumulatively. The MPC reiterated its continued focus on withdrawal of accommodation to contain inflation, while supporting growth.

(The writer heads Retail Research at Motilal Oswal Financial Services Limited)