This week, we expect domestic markets to consolidate in a broader range and take cues from global factors like the minutes of the Federal Open Market Committee meeting and China interest rate decision. It’s a busy week in terms of economic calendar with United States PMI and home sales data, Europe retail inflation, Jackson Hole Symposium and India’s PMI data.
Last week, Nifty witnessed a volatile journey on account of global cues but managed to end with gains of 174 points or 0.7 per cent at 24,368 levels. Broader markets too gained on similar lines with Midcap100 and Smallcap100 up 0.8 per cent and 0.1 per cent respectively. PSU banks and Energy were major losers while IT, Realty and Auto gained 1-5 per cent.
Oil and gas stocks saw momentum after the Ministry of Petroleum and Natural Gas announced a 20 per cent premium on gas produced from new wells. Metals and Mining, on the other hand, came under pressure after the Supreme Court allowed states to levy tax and royalty on minerals, apart from Central duties, and also allowed states to collect past dues.
The April-June earning season ended on a positive note, with overall growth driven by Automobiles and banking and financial services, and improved contributions from Healthcare, Real Estate, Capital Goods and Metals. Earnings for the Nifty50 companies rose at an average of 4 per cent year-on-year versus our estimate of 3 per cent plus. We expect the earnings momentum to continue with a steady growth of around 15 per cent over the next 2 years.
Sentiments got a boost after India’s consumer price index-based inflation eased to a 59-month low of 3.5 per cent in July 2024, mainly led by a base effect. Separately, Industrial production grew 4.2 per cent year-on-year in June.
On the global front, investors regained confidence in the US economy following encouraging consumer spending and labour data, which helped ease recession concerns. Soft inflation data further reinforced expectations of a rate cut in September. US CPI data eased to 2.9 per cent in July vs 3 per cent in June, falling below 3 per cent for the first time since March 2021.
In July, US retail sales increased by 2.7 per cent year-over-year, higher than 2 per cent in the previous month. Additionally, the initial jobless claims data came in better than expectations, marking the second consecutive week of decline. Thus, all eyes this week will be on the Federal Reserve meeting minutes, which will provide a hint of the next course of action and thus direction to the markets.
(The writer is the head of Retail Research, Motilal Oswal Financial Services Ltd)