India’s GDP, other macro data to drive markets this week

This week, investors will take cues from macro data including India’s GDP and US/China PMI numbers that would be released during the week. EU inflation data would also be watched. Auto sector stocks would be in focus on the back of monthly sales data to be announced next week. In the near term, we expect market to consolidate in the absence of any fresh triggers.

While earnings season ended on a moderate note, rising interest rate concerns continue to linger among investors. Even FIIs, which turned buyers in the previous week after a long period, again turned sellers last week with thin volumes, denting sentiments. Thus, we believe stock-specific action could be seen in the near term.

Post the end of Q3FY23 earnings season, we analysed the various management commentaries. While most of the banks have guided for a sustained momentum in loan growth, broad-based slowdown concern has been voiced in consumption, both staples and discretionary. On the other hand, the outlook for technology services sector remains positive given the long-term growth in tech-related spending resulting in sustained spends on associated IT services.

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3QFY23 was also buoyant for the hotel industry, aided by an increase in the average room rate (ARR), which led to higher revenue per available room (RevPAR) despite lower occupancy compared to pre-Covid levels. As per HVS Anarock, the industry is in the beginning of a five-year growth story, which will compensate for muted growth over the last 15 years. We anticipate robust growth to remain intact across hotels in FY24, led by increasing ARR, improved occupancy, operating leverage and favourable demand-supply scenario.

Domestic equities fell sharply last week following the FOMC meeting minutes which confirmed the hawkish stance of US Fed officials. Though the quarter-point hike was unanimously approved, few members favoured 50bps rate hike. RBI minutes of the monetary policy committee (MPC) too highlighted the concern among most members over elevated core inflation. The committee maintained its stance to continue with its policy tightening measures until inflation comes down within the target range, going forward.

Nifty fell 2.7 per cent during the week along with the broader market which was down ~2 per cent. India VIX climbed 8 per cent to above 14, pointing towards increasing volatility. All the sectors ended in red with Metals, Realty, PSU Banks and Media sectors down more than 5 per cent. Selling continued in banking stocks with a sharper fall seen in PSU Banks. Further fall in metal prices globally on account of concerns regarding slowing demand led to sharp decline in metal stocks, while rising unsold inventory in Mumbai on account of increasing interest rates led to the meltdown in realty counters.

(The writer heads retail research at Motilal Oswal Financial Services Limited)