NEW DELHI: Indian equity markets saw a decent rally and surged over 2% last week after three weeks of consolidation. Markets remained resilient on the back buying during Diwali season and strong Q2FY23 earning show put up by banking firms. The rally came despite multiple headwinds as the dollar rose above the 83 mark against the rupee while US bond yields were at a record high.
Sensex gained 1,387 points or 2.4%, while Nifty 50 soared by nearly 391 points or 2.3% in the week between October 17-21. “We are heading into a truncated festival week where bulls have reason to celebrate Diwali on a higher note, as the US market witnessed a sharp rebound in Friday’s trading session."
The market will continue to have an eye on the direction of global markets, the dollar index, US bond yields, and crude oil prices. On the domestic front, October month expiry may lead to some volatility whereas Q2 earnings will cause stock-specific movement, said Santosh Meena, Head of Research, Swastika Investmart.
Meena added that technically, Nifty is witnessing higher highs and higher lows formation after respecting its 200-DMA. On the upside, 17725 is an immediate hurdle; above this, we can expect a rally toward the 17900-18000 zone.
Ajit Mishra, VP - Research, Religare Broking said that Buoyancy on the banking front combined with a buying in select IT, energy and FMCG majors kept the tone positive for most of the week. “The coming week is a holiday-shortened one and it also marks the beginning of the new Samvat 2079. We have a special one-hour muhurat trading session on Monday i.e. October 24 on the auspicious occasion of Diwali.
The scheduled monthly derivatives expiry will keep the volatility high,” added Mishra. On the earnings front, participants will first react to the results of index majors like Reliance, ICICI Bank and Kotak Bank. Besides, other prominent names such Tata Chemicals, Dr. Reddy’s, Maruti, Vedanta and Tata Power will announce their numbers during the week. While RIL Q2FY23 results were below street estimate, ICICI and Kotak reported robust growth.
“Markets have managed to put on a good show so far amid the mixed global cues. However, we’ve been seeing restricted participation. It’s banking which is leading from the front while others are playing a supportive role in between. The broader indices too are showing a mixed trend at present. Amid all, we feel the market tone would remain positive however, the focus should remain on stock selection and risk management,” said Mishra.
The concerning thing for the Indian market remains falling value of local currency and strengthening of US bond yields in the backdrop of high inflation which is forcing the US Federal Reserve and other central banks to go for another round of key interest rate hikes. Mitul Shah - Head of Research at Reliance Securities said, “The Indian rupee has fallen 12% against the dollar so far this year. The market fear that more rate hikes by the US Fed could again harden US Treasury yields which could further weaken the rupee.”
Festival cheer: Bulls have reason to celebrate
India’s growth remains strong andexpected to be one of the fastest growing economies in the world.The market is looking at US Fed monetary policy meeting scheduled for 2 Nov. Commentary on festive demand, inflation outlook and rate hike will be keenly watched in the near term.
