This week, global central banks would be in focus as the rate cut cycle is likely to begin. The European Central Bank, last week, already lowered its policy rate by 25 basis points to 3.50%, following a similar cut in June. The United States Federal Reserve will announce its interest rate decision on Wednesday, and is widely expected to lower the rates by at least 25 bps. The central banks ofUnited Kingdom, Japan and China are also scheduled to meet during the week.
Apart from this, few macro data points like US existing home sales, core retail sales and industrial production along with India wholesale inflation and Europe retail inflation will be announced.
Last week, Nifty saw a recovery and hit a fresh high of 25,433 amid buying in index heavyweights. Strengthening hopes of a 25 bps rate cut by the Fed led to the bounce in the market. This was further supported by healthy buying by Foreign Institutional Investors who brought in around 15,200 crore. The index gained more than 500 points to finally close at 24,852. Broader markets too gained with Midcap100 and Smallcap100 up 2.6% and 1.2% respectively. All sectors ended in green, with most up 1-3%. FMCG, Private Bank and IT were the biggest gainers.
Crude oil prices fell to their lowest levels since November 2021 after OPEC slashed its global crude oil demand outlook for the second consecutive month, which had a positive impact on crude-dependent sectors. Hence OMCs, Paints, Tyres, Aviation, Cement, FMCG, etc were in focus and we expect the momentum to continue.
India's mutual fund industry achieved a milestone in August, with total assets under management surging to a record of ₹66.7 lakh crore. The inflows into equity mutual funds rose by 3% in August, reaching ₹8,239 crore. Despite concerns over high valuations, small- and mid-cap funds also witnessed strong inflows.
The primary market saw a lot of action last week with five mainboard companies open for subscription and two companies listed on the bourses. Bajaj Housing Finance attracted a lot of investor interest. The IPO received a record-high subscription of Rs 3 lakh crore, for the Rs 6,560-crore issue amid strong demand from both institutional and retail investors.
On the global front, while US jobs data has been disappointing, inflation remained low at 2.5% in August for a fifth consecutive month. Further, media reports also suggest that China is poised to cut interest rates on more than $5 trillion of outstanding mortgages.
Despite global volatility, domestic equities have shown resilience at every decline and have recovered by 500 points from lower levels. This is supported by healthy macros and both retail and FII participation. Overall we expect the market to continue its consolidation mode with a gradual up move. Defensive sectors like IT, Pharma, and FMCG are likely to remain in traction.
(The writer is head of Research, Wealth Management, Motilal Oswal Financial Services Ltd)