Markets drop in a volatile week
Benchmark indices ended with small losses in a volatile trading week led by positive global market cues and a good start to Q1FY22 earnings season. Activity in the primary markets too remained upbeat which supported the overall sentiments. Global markets remained firm on solid earnings reports despite a rise in cases of delta variant Covid-19. A renewed optimism about the U.S. economic recovery fuelled a risk-on rally. For the week, the Nifty ended down by 0.4 pct to 15,856 levels. The Nifty Midcap 100 and Nifty Smallcap 100 indices too fell 0.96 pct and 0.38 pct respectively. Sector wise, the Nifty Bank index fell 2 pct while the Nifty Auto index fell 2.2 pct. The Nifty IT index gained 1.7 pct while the Nifty FMCG and Realty index were up 0.8 pct each. On the stock specific front, Wipro gained 3.7 pct and was the top Nifty gainer followed by Bajaj Finserv, Asian Paints and BPCL which gained about 3 pct each. On index losers side, IndusInd Bank, HDFC Bank and Tata Motors fell about 5 pct each.
On crude oil front, Brent rose week on week, as improved risk appetite provided support despite data showing an unexpected rise in U.S. oil inventories. Brent crude oil prices rebounded around 7 pct from lows, following a deal by the OPEC+, to boost supply by 400,000 barrels per day from August through December.
On the macro economic front, the Asian Development Bank has downgraded India’s economic growth forecast for the current financial year to 10 pct as inflation is seen rising marginally to 5.5 pct.
Globally, a data showed that the number of Americans seeking unemployment benefits rose last week from the lowest point of the pandemic, even as the job market appears to be rebounding on the strength of a reopened economy. Meanwhile, the European Central Bank said interest rates would stay at their current record low levels until it sees inflation “durably” reaching the bank’s new target of 2 pct. Japan kept the overall assessment of its economy unchanged for a second straight month in July, retaining the view that conditions remain severe due to the impact of the coronavirus pandemic.
U.S Fed Meeting, Reliance Industries will be in focus
For the coming week, volatility is expected to remain high on account of derivatives contract expiry on Thursday. Stock specific movement is expected to continue as the earnings season enters the next leg. Some of the prominent earnings are ICICI Bank, ITC, IndusInd Bank, Axis Bank, Vedanta, Tata Motors, L&T, Kotak Mahindra Bank, Dr. Reddys and Maruti. Progress of monsoon will also be watched.
On the stock specific front, Reliance Industries will be in focus after its Q1FY22 net profit fell 7.2 pct YoY to Rs 122.73 bn vs street expectations of Rs 132 bn. Jio reported a net profit of Rs 36.5 bn, up 45 pct. Its average revenue per user (ARPU) during the quarter stood at Rs 138.4 per subscriber per month. Its retail arm Reliance Retail Ventures posted a 123 pct YoY growth in its net profit. The customer base as on June 30, 2021, stood at 440.6 million, a net addition of 42.3 million customers YoY. On the global front, the U.S federal Reserve will announce its interest rate decision on 28 July 2021. The focus will be on when the committee will communicate to the markets that tapering is on its way. In his latest testimony, Powell indicated that there has not been “further substantial progress” in the labour market to warrant tapering.
Author: Nisha Harchekar – M.M.S (Finance) – 16 yrs+ experience as Equity Research Analyst
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