This week domestic markets are expected to continue their uptrend, supported by positive global cues, healthy macros, and optimism surrounding the upcoming budget. However volatility cannot be ruled out given a couple of economic data releases. The United States, India and China will be releasing PMI data while the Eurozone will be announcing its inflation data. Minutes of the latest Federal Open Market Committee and Federal Reserve chairman Jerome Powell’s speech will also be important to track.
It was a historic week for Indian equities as the Nifty and Sensex crossed another milestone. Both the indices made fresh highs of 24,174 and 79,671 levels respectively. Nifty ended the week with gains of 510 points (2.2%) to close at a new high of 24,011. Broader markets, however, underperformed with Nifty Midcap 100 and Nifty Smallcap 100 up just 0.6% and 0.5% respectively as profit booking set in. Sectorally it was a mixed bag. Energy, Infra and IT gained around 3% while Metals and Realty sectors saw profit booking.
The cement sector saw a lot of buzz as market leader UltraTech announced acquisition of a 23% stake in India Cements Ltd for over Rs 1,900 crore, to further strengthen its pan-India presence. This was followed by the Adani group’s announcement of merger and ownership restructuring of its cement assets. Such sectoral consolidation will keep smaller listed players in the limelight. The stocks will also be driven by expectations of higher government capital spending.
The Department of Telecommunications concluded its 5G Spectrum Auction with bids worth Rs 11,300 crore. In addition, Reliance announced a much-anticipated hike in tariffs, followed by Airtel and Vodafone.
On the domestic macro front, investor sentiments got a big boost as the current account balance turned surplus in the January-March quarter due to higher service exports. In the upcoming budget, the focus will remain on fiscal consolidation along with growth-oriented measures aimed at addressing rural stress. Banking and financial stocks saw interest as Indian bonds were included in the JP Morgan Bond Index on June 28.
We expect the positive momentum to continue in the market at a steady pace with stock-specific action.
(The writer is head of Retail Research, Motilal Oswal Financial Services Ltd)