Post Market Views - June 15, 2022 - Reliance Securities

Mr Mitul Shah, Head Of Research at Reliance Securities

Domestic equities closed lower following weak global cues as global inflationary pressure impacts market sentiment. Nifty declined 0.5% while Nifty Mid-Cap and Nifty-Small Cap fell by 0.3% and 0.7% respectively. Most sectoral indices ended in red with Nifty Financial Services plunging the most at 0.74%, followed by Nifty Pvt Bank which declined 0.72%. Nifty Reality and Nifty Metal were the gainers which were up, 0.8% and 0.3% respectively. Commodity prices continue to remain elevated and despite passing on the costs to consumers, India Inc is still facing margin pressures. 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.

U.S. equities ended lower as investors mulled over Friday's inflation data while facing a greater chance of aggressive monetary tightening. The S&P 500 slumped 3.9%, the Dow Jones fell 2.8%, while the tech-heavy Nasdaq declined 4.7%. The yield on the benchmark 10-year U.S. Treasury note, rose to 3.371%, from 3.156% Friday marking its largest one-day gain since Mar'20. Moreover, the markets were impacted by the fears of tighter U.S. policy and a potential growth slowdown.

India's retail inflation came down a bit at 7.04% YoY in May from 7.79% in April owing to easing food prices in the month of May. The government is eager to assist with inflation management in order to keep monetary tightening to a minimum. Following RBI's 50 bps hike, US Fed is also expected to hike interest rates, while the ECB raised its inflation expectations for the euro zone significantly and downgraded its growth forecasts. The ECB raised its inflation projections and cutting down 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.