Markets week ahead: Will there be more bulls on equities? These factors to drive mood
- RBI hiked the repo rate once again to tame the soaring inflation which was on expected lines. Also, RBI's confidence in the economy's growth momentum lifted the overall appetite in the equities market last week.
Markets reacted to RBI's third 50 basis points rate hike action with a positive bias. Domestic equities altered their seven-day losing streak by end of the last week. Both Sensex and Nifty 50 recovered hefty losses of the previous trading sessions on Friday, with the rupee strengthening against the US dollar. Further, a slowdown in foreign investors funds' outflow was also witnessed. RBI hiked the repo rate once again to tame the soaring inflation which was on expected lines. Also, RBI's confidence in the economy's growth momentum lifted the overall appetite in the equities market. This week, a host of factors will contribute to the mood of the market.
Last week, on Friday, Sensex closed at 57,426.92 higher by 1,016.96 points or 1.80%. Nifty 50 ended at 17,094.35 up by 276.25 points or 1.64%. Heavyweights like Reliance Industries, Bajaj Finance, Bajaj Finserv, HDFC Bank, Bharti Airtel, HDFC, Maruti Suzuki, and ICICI Bank boosted the performance.
Banking stocks emerged as top bulls, while consumer durables, auto, metal, capital goods, and financial stocks also added to the strong upside. In broader markets, Midcap and Small cap indexes climbed over 1% each.
At the interbank forex market, the Indian rupee settled at 81.40 against the US dollar on Friday up by 33 paise from its previous closing of 81.73 per dollar. Meanwhile, funds outflow slowed down by foreign investors (FIIs) to ₹1,565.31 crore by end of September 30 compared to the outflow of ₹3,599.42 crore on September 29. Last week, FIIs made their steepest selling in the equity market for September month.
Before the day of RBI's policy, Indian markets were under selling pressure for seven consecutive days. Sensex and Nifty 50 nosedived more than 5.5% each between September 21 to September 29 before climbing nearly 2% each on September 30.
In September 2022 policy, RBI hiked the repo rate by 50 basis points taking it to 5.9%. Consequently, the standing deposit facility (SDF) rate stands adjusted to 5.65%, while the marginal standing facility (MSF) rate and the Bank Rate to 6.15%.
With the latest hike, RBI has now raised the key repo rate fourth time in a row. So far in the current fiscal, the repo rate has increased by 190 basis points.
The six-member MPC also decided to remain focused on the withdrawal of accommodation to ensure that inflation remains within the target going forward while supporting growth.
RBI has projected CPI inflation at 6.7% for the current fiscal, while real GDP growth is projected by 7% by FY23-end.
What to market from markets between October 3-7?
Vinod Nair, Head of Research at Geojit Financial Services said, "Fed’s hawkish approach to tame inflation through aggressive interest hikes was a misfortune for the domestic market’s bull-run. Although the domestic economy is buoyed by solid fundamentals, the stock market's appetite for risk has been hindered by the rising worry of a worldwide recession. As the 10yr yield spread between India and US fell to a multi-year low, foreign investors have started departing from the Indian market. This, along with increased interest in the dollar as a safe haven option, forced the rupee to trade at its all-time low levels. Domestic investors have been turning to IT and pharma companies, which have been in a consolidation phase for the past year and are now benefiting from the INR depreciation.
However, Nair added, "an in-line rate hike along with the RBI’s confidence in the economy’s growth momentum helped the domestic market to alter the losing streak. The choice to maintain inflation at 6.70% with a slight reduction but a sound GDP prediction of 7.0% demonstrates the Indian economy's resiliency"
According to Apurva Sheth, Head of Market Perspectives, Samco Securities, with no major events expected in the following week, markets may be dominated by global news flows. US unemployment and domestic data such as manufacturing, deposits, and loan growth numbers could drive investor sentiment next week. The volatility in oil prices and the strengthening of the US Dollar compared to other currencies will be other important factors that may affect the market.
"Investors must keep an eye out for stock-specific news," Sheth added.
On Nifty 50, Sheth said, “The Nifty ended the week down by more than 1%. It finished the week with a hammer candle, indicating that the short-term correction is likely over. The daily RSI is also starting to recover from 40 levels, signalling that the upward trend may resume soon. In monthly expiry, call writing near the 17,000 strikes indicates that this level is likely to act as massive support. October is a bullish month for the markets based on seasonality. Out of the last 10 Octobers, 8 times markets have ended on a positive note. As a result, traders should look for buying opportunities.”
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
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