It turned out to be favourable for the domestic equity market with the benchmark equity indices extending their gains for the third straight week. The 30-share BSE Sensex soared 884.57 points, or 1.61 per cent, to 55,769.23 on June 3 from 54,884.66 on May 27, 2022. Likewise, the 50-share NSE Nifty index added 231.85 points, or 1.42 per cent to 16,584.30 during the same period. Broader indices including the BSE Midcap and Smallcap advanced 1.14 per cent and 2.98 per cent, respectively. Market watchers believe that hopes of economic revival and good monsoon boosted sentiment.
With a gain of 8.30 per cent, Coal India topped the list among Nifty50 companies. It was followed by Mahindra & Mahindra (up 8 per cent), Reliance Industries (up 7.9 per cent) and Tata Consultancy Services (up 5.5 per cent).
Coal India gained as its coal production increased by 30 per cent to 54.7 million tonnes in May 2022 as against 42.1 million tonnes in May 2021. The company’s production in the April-May 2022 period increased 28.8 per cent to 108.2 million tonnes, compared with 84 million tonnes in the year-ago period.
On the other hand, Mahindra & Mahindra gained traction after it posted over 100 per cent growth in consolidated net profit for the quarter ended March 31, 2022. On a standalone basis, the company reported 5-fold YoY jump in its net profit at Rs 1,291.94 crore during the quarter under review.
Vinod Nair, head of research, Geojit Financial Services said, “Two factors for the bounce were a reduction in FIIs selling due to good earnings in the US and maintenance of domestic inflows. High-frequency data like GST collection and PMI have shown a good start to FY23. Elevated crude oil prices, GDP data and FII selling, and upcoming central bank meetings were other factors that drove the market during the week. GDP data released this week were in-line with expectations of slower growth as consumer spending and investments were hurt by soaring inflation. The continuous rise in crude oil prices due to the EU’s decision to partially ban Russian oil hindered the global market. However, the lack of confidence in the domestic market resulted in a sell-off towards the closing hours of the week driven by concerns over central bank policy.”
Meanwhile, the country’s rainfed agriculture region is set to receive above-normal rainfall this monsoon season, the weather office said on Tuesday raising hopes for a bumper farm output and reining in inflation.
According to India Meteorological Department, the average rainfall this monsoon season is expected to be 103 per cent of the long-period average.
In the forthcoming week, market participants will zero in on the data of Index of Industrial Production (IIP), which is scheduled to be released on June 10. Industrial production in India grew 1.9 per cent YoY in March of 2022, advancing from a downwardly revised 1.5 per cent rise in the previous month.
Meanwhile, the Reserve Bank of India (RBI) is widely expected to go for faster, steeper interest rate hikes in the upcoming Monetary Policy Committee (MPC) meeting scheduled during June 6-8, 2022. Following a surprise rate rise on May 4, several members of the Monetary Policy Committee (MPC) called for more in upcoming meetings this year to control sticky price pressures, which hit an eight-year high last month.
Yesha Shah, head of equity research, Samco Securities said, “Inflation being a key factor will be the central point of all discussions in the coming week as China and United States’ inflation statistics will be released. Another significant event for domestic markets will be the outcome of the RBI MPC meeting.”
Shah further added that market participants will try to read between the lines of the RBI's monetary policy and given the worsening inflation fears, the street expects a 35-50 basis points repo rate hike this time. “Considering these major events, investors are currently advised to use knee-jerk reactions to, at best, cherry-pick quality stocks in resilient sectors and invest in a staggered manner,” Shah added.
“The RBI is expected to hike rates by 25 bps to 35 bps and Fed by 50 bps, however, the central banks’ thoughts on growth and inflation will be an important determinant of market trend. If the central banks decide on a stringent policy tightening, the market mood can swing bearish," Nair said.
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