Post Market views - June 28, 2022 - Reliance Securities

Mr Mitul Shah, Head Of Research at Reliance Securities.

The domestic equities ended marginally higher amid re-emergence of fears of global inflation. Nifty rose 0.1%, Nifty Mid Cap increased 0.1% while the Nifty Small Cap lost 0.3%. Sectoral indices ended mixed as Nifty Oil & Gas witnessed the highest jump at 2.3% followed by Nifty Metal which was up 1.7%. Nifty Consumer Durables and Nifty Pvt Bank were the major laggards which fell 1.3% and 0.7% respectively. The Indian rupee hit a record low of ~78.8 against the U.S. currency, earlier in the session as elevated oil prices raised concerns of sustained inflation although, intermittent dollar selling by the central bank helped limit losses. India imports more than 66% of its oil requirements, and higher crude prices add to the country's trade and current account deficits and drag down the rupee by pushing up imported inflation.

U.S. equities ended lower as the major indexes failed to maintain last week's momentum of easing expectations for the path of the Federal Reserve's interest-rate hike. The S&P 500 lost early gains and closed 0.3%, lower, the Dow Jones fell 0.2%, while the Nasdaq declined by 0.7%. 10-year U.S. Treasury note traded at 3.193%, up from 3.125% on Friday. The University of Michigan revised lower its June reading of inflation expectations over the next five to 10 years to 3.1% from 3.3%. Furthermore, data showed that durable-goods orders for May had risen more than expected and U.S. pending-home sales rose in May by 0.7%.

Crop sowing has picked up its pace and could avoid a worsening of food inflation. Monsoons will heavily influence India's economic outlook in the coming weeks. Farmers and the Indian government are banking on the monsoon rains to keep rice production, inventories and food inflation at a manageable level. Moreover, with 1QFY23 nearing its conclusion, investors are prepping for corporate earnings results for the quarter. Interest rate hikes, growing concerns about corporate profits and economic growth continue to throttle investor sentiments amid global issues of Russia-Ukraine war. While Oil and food input prices have majorly pushed up inflation, commodity prices are showing signs of settling down as copper witnessed its sharpest weekly fall since Mar'20. FIIs have sold more than $39bn over the past 9 months, making it the largest and longest sell-offs, even worse than the global financial crisis of 2008. Moreover, the GST Council is meeting on June 28-29 in and is likely to consider e-way bill mandatory for intra-state movement of gold and precious stones worth Rs 2 lakh and above and also e-invoicing mandatory for certain B2B transactions.