Post Market views - June 13, 2022 - Reliance Securities

Mr Mitul Shah, Head Of Research at Reliance Securities

Domestic equities closed lower following global sell-off due to sharp jump in US Inflation to 8.6% YoY in May, highest since 1981. Consumer sentiment data in US came in at a record low, as inflation weighs on American households. The headline inflation, driven by rising oil and food prices, has moved substantially higher over the last few months, which dragged US markets on Friday. This influenced Asian markets on Monday morning opening trade. In line with global cues Nifty declined 2.6% while broader markets underperformed compared to the main indices as Nifty Mid-Cap and Nifty-Small Cap fell by 3% and 3.9% respectively. All sectoral indices ended in red with Nifty IT plunging the most at 4.1%, followed by Nifty Media and Nifty Metal which declined 3.97% and 3.85% respectively. Globally, US inflationary pressures have reignited worries about even more aggressive Fed policy tightening, while the continued spreading of COVID-19 in Beijing has added to concerns about global growth. Moreover, the World Bank recently has trimmed its FY23 growth forecast for India to 7.5%, from its previous forecast of 8.7%, due to rising inflation, supply chain disruptions, and geopolitical tensions.

U.S. equities closed lower for the week with S&P 500 dropped 5.1%, the Dow Jones fell 4.6%, while the Nasdaq declined 5.6%. As the Fed is looking to bring down fast-rising prices, the central bank is widely expected to raise interest rates by another 50 bps. The European Central Bank confirmed its intention to hike interest rates by 25 basis points at its July meeting, with a further hike expected in September, the scale of which will be determined by the medium-term inflation outlook.

RBI is looking at another phase of coordinated action between fiscal and monetary authorities. Following RBI's 50 bps hike, US Fed is also expecting to hike interest rates next week. The ECB also raised its inflation expectations for the euro zone significantly and downgraded its growth forecasts. The ECB raised its inflation projections but cut its growth outlook as the conflict in Ukraine continues to weigh on confidence, consumption and investment. Investors are still attempting to gauge the market's trajectory as global markets have also remained volatile due to FED's upcoming policy decisions and the Russia-Ukraine crisis which is affecting supply chain and logistics.