Markets on a wait and watch mode as they await cues from RBI
- Today Sensex and Nifty 50 were down about 0.5% each at 57,859 points and 17,254 points respectively.
- Much of the weakness was because of poor cues from global markets worrying about recession.
- Currently, markets are in a wait and watch mode awaiting Reserve Bank of India’s decision on interest rates tomorrow August 3.
AdvertisementIndian stocks markets are taking a breather from last week’s rally in spite of better than expected earnings reports, positive outlook of auto sales numbers and even a strengthening rupee.
“Markets are likely to take a breather and see a gap down opening tracking weakness in other Asian indices and overnight fall in US gauges. However, there is a possibility that the market could edge higher as the trading progresses on some positive catalysts like the US treasury yields falling in the overnight trades, robust July GST collections, and foreign investors continuing to take exposure to local equities over the past few weeks,” said Prashanth Tapse, senior VP of research at Mehta Equities.
Sensex and Nifty 50 were down about 0.5% each at 57,859 points and 17,254 points in early morning trade. Much of the weakness was because of poor cues from global markets like fear of recession, and central banks raising interest rates across countries.
Both the benchmark indices have been witnessing a bumpy ride for the last few weeks, and now their path is event bound. They have shifted into the wait and watch mode as they await the Reserve Bank of India’s decision on interest rates tomorrow August 3.
After increasing interest rates by sharp 90 basis points together in May and June, analysts are expecting another 35-50 basis points hike in repo rate.
|Top gainers today||Top losers today|
|IndusInd Bank (1.54%)||UPL (-3.56%)|
|SBI (1.24%)||Hindalco (-3.30%)|
|ITC (1.07)||Hero MotoCorp (-2.28%)|
|Tata Consumer Products (1%)||ONGC (-2.10%)|
|Asian Paints (0.8%)||SBI Life Insurance (-1.84%)|
Receding inflation risks?
Analysts hope that the RBI policy outcome to be softer and provide relief to the wounded markets.
“Sharp drop in commodity prices and a pickup in monsoon should ease some pressure from the RBI. It may, nonetheless, hike the repo rate by another 50 basis points just to withdraw the excess monetary accommodation provided during the pandemic. We expect the RBI’s commentary to soften a bit with an acknowledgement that inflation risks are receding,” said Pankaj Pathak, fund manager-fixed income at Quantum AMC.
As the Dollar strengthens, there is some relief on outflows by foreign institutional investors (FIIs) that have cooled down the pace of selling Indian assets.
FIIs taking a U-turn
FIIs bought around ₹2,000 crore of Indian assets including equity, debt and hybrid in July and ₹925 crore on August 1 itself in a sharp divergence from net outflows of ₹51,000 crore in June.
“On Monday FIIs bought shares worth ₹2,321 crore and were also buyers in Friday’s trade to the tune of ₹1,046 crore. The sentiments are also likely to be buoyed by better-than-expected Q1 earnings from India Inc, easing China Covid curbs, and hopes of a less hawkish Federal Reserve going ahead,” said Tapse.
AdvertisementNot only the reversal of FII flows but also healthy corporate earnings are providing a breather to markets that have seen sharp volatility in recent months.
|Market rally from lows of 20 June||% change|
|Nifty Metal Index||24%|
“The earnings growth in 1QFY23 has been subdued and led solely by BFSI. However, the spread of earnings has been decent with 68% of our universe either meeting or exceeding profit expectations. As the benefit of the recent moderation in commodity costs start accruing in the second half of FY23E, we expect other sectors to contribute too,” said a report by Motilal Oswal.
Strong passenger vehicles sales in July has also been a positive cue for the market. As many as 342,300 passenger vehicles were sold in July, as per industry estimate by Motilal Oswal.
SEE ALSO: Auto sales data July 2022: Maruti and Toyota post strong growth in sales while MG Motor and Kia decline
ITC’s net up 33% in Q1 on a strong show in cigarette, hotel, agri segments
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