Nifty 50 remains the top performer in Asia despite tussle between bulls and bears

• While global uncertainties tear up investor confidence, the Nifty50 has been the best performer in Asia over the last one month.
• During this period, automobile, FMCG, public sector banks and real estate companies have been the most attractive stocks.
• Further, analysts believe markets will move on performance of companies and sectors in the last three months and global macro conditions.

Indian equities have been volatile in the last couple of weeks amidst rising interest rates, global inflation and re- emergence of Covid cases – especially in China.

The index has managed to outperform Asian peers in the last one month, despite global uncertainties hindering the index movement.

Bulls vs bears
Over the last one month, automobile, FMCG, public sector banks and real estate companies have been the top gainers.

“We’re seeing a tussle among the bulls and bears, not only in Indian markets but globally. A decisive close below 15,900 may change the index tone again but we feel sectors like auto and FMCG would continue to offer trading opportunities on the long side. Besides, select stocks from other sectors like pharma, realty, banking and financials are also attracting decent traction,” said Ajit Mishra, VP of research at Religare Broking.

Shares of metal and IT services have been shedding value significantly in the couple of weeks due to huge sell off, while traction in FMCG and automakers due to fall in prices of commodities like crude oil, palm crude oil (one of the key raw materials for FMCG firms), edible oil, gold, wheat, are holding the fort for Nifty 50.

“Metal and IT stocks might see some consolidation after a huge sell-off in them. FMCG and auto are gaining traction due to good earnings expectations and a fall in raw material prices in cases of FMCG companies. Metals and IT together contribute about 18% to the Nifty index whereas BFSI, FMCG, auto contribute more than 50% thus reducing the drag effect of metals and IT in the upcoming quarters,” Manoj Dalmia, founder and director at Proficient Equities Private told Business Insider India.

Not to forget, sharp selling by foreign portfolio investors (FPIs) for 10 consecutive months continues to weigh on investor sentiment. In fact, FPIs have been selling Indian equities even more aggressively than what was witnessed during the 2008 global financial crisis.

The selloff in the last 12 months is twice as much as that seen in 2008, when the sub-prime crisis hit the US, sinking banks, financial markets and more.

The exodus of foreign investors has left a huge scar on the markets as Sensex corrected nearly 8% in 2022.

“On the flip side, IT and metals are still not showing any sign of reversal despite the oversold positions. Participants should align their positions accordingly and prefer a hedged approach citing the overnight risk and volatility due to the earnings season,” said Mishra.

The season of earnings
Further, analysts believe markets will move on performance of companies and sectors in the last three months and global macro conditions.

“Markets will continue to react to global macro factors like inflation, interest rate measures, currency and commodity movement. With the start of the April-June 2022 quarter result season, we can expect stock and sector specific action over the next one month,” said Shrikant Chouhan, head of equity research (retail) at Kotak Securities.

The earnings season has started on a soft tone as TCS disappointed investors with its modest profit growth due to added cost pressures. This has set a bad mood for the entire IT pack especially its closest peers Wipro, HCL Technologies, which have lost more than 8% of its value in the last one month.

Experts say that as concerns of growing inflation and recession hang over the global economy, Indian benchmark indices are projected to remain uncertain in the near term. Investors are anticipated to keep a close watch on the currency market, as the USD/INR has reached new all-time lows of 80.23.

“Further, with the earnings season in full swing, market players should avoid reading too much into India Inc's numbers and instead focus on the management commentary,” said Apurva Sheth, head of market perspectives at Samco Securities.

$NIFTY50.NSE Two years back when the Covid-19 led disruption kicked in, every country and central bank rushed to print money with a view that once normalisation kicked in, growth will take care of inflation. Cut to two years later, you suddenly have supply-side shocks, concerns around growth and further geo-political challenges. As far as India is concerned, all measures were designed in a very effective mode to ensure you get the bang for the buck - 1 - Sovereign Guarantees for incremental credit 2 - Distribution of food grains > hard cash 3 - Active central bank regulating the entire credit ecosystem to eliminate systemic shocks

— (@mehrotra_saket) July 18, 2022

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