Stock markets are expected to continue their positive momentum this week, guided by the start of the January-March earnings season and global and regional macro data. The focus will be on the Federal Reserve minutes, the European Central Bank policy meeting and US inflation data, which investors are keen to see.
Domestically, the focus will shift to fourth-quarter earnings as TCS begins its earnings season on April 12. Retail inflation in India will be an important event to track, especially given the persistent food inflation highlighted by the Reserve Bank of India.
Indian equities started FY25 on a strong note with the Nifty hitting new highs and continuing its momentum. Fourth-quarter earnings updates from several prominent companies were primarily encouraging and drove stock-specific moves in the market.
For the week, Nifty rose 187 points (+0.8%) to end at 22,514 levels. The broader market significantly outperformed, with the Midcap100 and Smallcap100 up 4% and 7% respectively. In fact, the Midcap100 has made a new high, while the Smallcap100 is just a few points off its previous high.
All sectors ended in the green, with PSU banks, metals and real estate being the biggest gainers, rising 4-5%. Strong performance updates from some banks led to a recovery in the sector. Rising global metal prices and India's manufacturing PMI rising to its highest level in 16 years led to gains in metal stocks.
Real estate stocks gained momentum after unsold housing inventory in nine major Indian cities fell by 7% in the January-March period, according to PropEquity.
The RBI kept the repo rate unchanged at 6.5% for the seventh consecutive time, maintaining its stance of “withdrawal of easing measures'' in line with market expectations. However, it maintained the FY25 GDP rate at 7% while forecasting retail inflation at 4.5%.
Meanwhile, global markets saw profit-taking as concerns about the timing of the Fed's interest rate cuts resurfaced following the release of stronger economic data. Oil prices rose further to a five-month high of nearly $90 a barrel after OPEC+ ministers left oil supply policy unchanged and urged some countries to comply with production cuts. This made me feel slightly worse.
Overall, we maintain a positive bias towards the market, driven by strong earnings updates. We believe that any decline in the market can be viewed as a buying opportunity.
(The author is Head of Retail Research at Motilal Oswal Financial Services Ltd)
(issued April 7, 2024, 23:27 IST)