This week, the domestic market is likely to consolidate ahead of release of inflation data from United States, United Kingdom and India, as hawkish commentary from the Federal Reserve and Reserve Bank of India and diminishing hopes of early rate cuts has turned investors cautious.
Moreover, this week marks the end of third quarter earnings season which has been a mixed bag so far. Many state-owned companies like Coal India, HAL, SAIL, Mazagaon Dock, ONGC, Nalco, Oil India, and IRCTC among others will be declaring their results, which investors will keenly watch out for after the profit booking witnessed on Friday.
Apart from inflation, India’s industrial production along with US retail sales data will be tracked. Also, Japan, UK and Eurozone will release GDP numbers.
Last week, Nifty witnessed volatile sessions and oscillated in a range of 400 points before ending with marginal loss of 71 points (-0.3%). Broader market witnessed sharp sell-off on the last day on account of the rise in crude oil prices and muted global cues.
For the week, Midcap100 closed with gains of 0.8% while Smallcap100 ended flat. Private banks, FMCG and financials were the losers while PSU Banks rallied more than 5% followed by 3.6% gain in pharma. Energy and realty too gained more than 2% during the week.
PSUs saw some profit booking on Friday amid mixed set of results and a sharp run-up over last few months. FMCG too saw some pressure amid muted earnings. On the other hand, Realty sector was in momentum amid healthy numbers posted by real estate companies.
Hawkish tone of RBI somewhat dented investor sentiments. Though RBI in its monetary policy maintained status quo on interest rates, it decided to remain focused on the withdrawal of accommodation to ensure that inflation progressively aligns with the target while supporting growth. However, on the positive side, the MPC noted that domestic economic activity is holding up well and is expected to be backed by the momentum in investment demand, optimistic business sentiments, and rising consumer confidence.
The inflow in the capital market has been robust with the number of demat accounts opened in January totalling over 46 lakhs. Equity mutual funds witnessed inflows of Rs 21,780 crores while SIP hit a fresh record of Rs18,839 crore.
Third quarter earnings so far have been mostly inline, primarily been led by the BFSI, Metals, O&G, and Auto sectors. This week would be the last leg of results post which the investor attention would shift to global factors especially the Red sea crisis, which still continues to linger. Crude oil price has already surged to $81/barrel post Gaza ceasefire rejection. This could be a cause of concern for inflation if the price escalates further.
(The writer is head of Retail Research, Motilal Oswal Financial Services Ltd)