Markets recover on global cues; RBI Policy in focus this week
Markets recovered after three weeks of decline as global cues remained positive and flight to risky assets increased as investors chased riskier assets on calming concerns of systemic risk in the US banking system. For the week, the Nifty ended higher by 2.4 pct to 17,360 levels. Nifty Midcap 100 and Nifty Smallcap 100 gained 1.6 pct and 0.8 pct. The Nifty PSU Bank index gained 4.2 pct and the Nifty Bank index was up 3.1 pct. Nifty IT gained 2.7 pct and the Nifty Metal index gained 2.3 pct. There were no sector losers this week. FIIs were net sellers to the tune of Rs 22.43 bn and DIIs were net buyers to the tune of Rs 49.53 bn.
Crude oil posted positive returns as supported by lower U.S. crude stockpiles and a halt to exports from Iraq’s Kurdistan region, which offset pressure from a smaller-than-expected cut to Russian supplies. Brent crude added 6.4 pct during the week to USD 79.77 a bbl. Gold prices witnessed a strong jump from the low, but fell 1.6 pct for the week to USD 1,969 an oz. On the macro front, the Indian government announced the fiscal first-half borrowing plan largely in line with previous years, The government plans to sell about Rs 9 trn of bonds in the six months to September, or 58 pct of the record Rs 15.43 trn full-year target.
Stocks/Sector in Spotlight
- Reliance Industries gained after the company announced that an EGM on the 2nd of May will be held to split the share and demerge Jio Financial Services Limited from the company in the ratio of 1:1.
- Defence stocks gained after they won large contracts from the Ministry of Defence. Bharat Dynamics signed a contract for Rs 81.61 bn with the Ministry of Defence for the production and supply of the Akash Weapon System to the Indian Army. Bharat Electronics has signed two contracts with the Ministry of Defence worth a total of Rs 23.94 bn. Cochin Shipyard emerged as the lowest bidder in the tender floated for the construction of six ‘Next Generation Missile Vessels’. Garden Reach Shipbuilders and Engineers signed a contract with the Ministry of Defence for the construction of four next-generation offshore patrol vessels.
- Hero MotoCorp’s total dispatches jumped 15 pct to 5.19 lakh units, boosting the wholesale sales for the FY23 to 53.29 lakh units, up 8 pct YoY. Exports more than halved to 16,612 units.
- Eicher Motors Ltd.’s total motorcycle sales rose 7 pct year-on-year to 72,235 units in March with a significant jump in dispatches in overseas markets. Its total sales jumped 39 pct to 8.35 lakh units in FY23. Exports for the month jumped 34 pct to 12,351 units.
- TVS Motor Co. Ltd.’s total dispatches rose 3 pct year-on-year to 3.17 lakh units in March. Total exports fell 31.6 pct to 75,037 units.
- Tata Motors Ltd.’s total domestic sales rose 3 pct year-on-year to 89,351 units in March with flat commercial vehicle sales and a rise in dispatches of passenger vehicles. Passenger vehicle sales grew 4 pct to 44,225 units. PV sales in FY23 jumped 45 pct to 5.4 lakh units.
- Maruti Suzuki India Ltd.’s total dispatches to dealerships remained flat at 1.70 lakh units in March with domestic sales falling marginally. Domestic sales fell nearly 2.7 pct to 1.40 lakh units. Exports rose 13.7 pct to 30,119 units.
- ONGC, Oil India, Reliance Industries- The government has kept domestic gas prices unchanged. Gas produced from old blocks that were awarded to ONGC and Oil India will continue to cost USD 8.57/MMBtu according to the oil ministry’s Petroleum Planning and Analysis Cell. The ceiling price of gas produced from Reliance Industries Ltd.’s KG-D6 block in the eastern offshore has been cut to USD 12.12/MMBtu from USD 12.46/MMBtu in the second half of fiscal 2022-23.
International News
- US initial jobless claims rose to 198,000, an increase of 7,000 from the previous week’s unrevised level of 191,000. Economists had expected jobless claims to inch up to 196,000.
- US real gross domestic product shot up by 2.6 pct in the fourth quarter compared to the previously reported 2.7 pct jump. Economists had expected the pace of growth to be unrevised.
- The US pending home sales index climbed by 0.8 pct to 83.2 in February after spiking by 8.1 pct to 82.5 in January. Economists had expected pending home sales to slump by 3.0 pct.
- The eurozone economic confidence index unexpectedly fell to 99.3 in March from 99.6 in February. The score was forecast to rise to 99.8.
- China’s non-manufacturing Purchasing Managers’ Index, which takes into account the business conditions in services and construction, unexpectedly advanced to 58.2 in March from 56.3 in February.
- The total value of retail sales in Japan was up 6.6 pct on year in February, the Ministry of Economy. That beat forecasts for an increase of 5.8 pct and was up from the downwardly revised 5.0 pct gain in January.
Mutual Funds Industry Update
SEBI allows mutual funds to launch multiple ESG-based schemes – The SEBI, has announced a slew of measures to boost ESG factor-based investing in India through mutual funds. Mutual fund houses henceforth can launch more than one scheme, the investment mandate of which is governed by ESG factors. ESG ― Environmental, Social, and Governance ― factors-based investing is catching up in all parts of the world.
Outlook for the Week
The week is a holiday-shortened one as markets will remain closed on April 4 on the occasion of Mahavir Jayanti and on April 7 due to Good Friday. Markets will take cues from RBI’s policy meeting outcome on April 06. A 25-bps rate hike is expected by the market participants. The RBI raised its key repo rate by 25 bps to 6.5 pct during its February 2023 meeting, in line with expectations, the sixth-rate hike in a row.
Results season which will set in this week will keep the markets volatile. Earning growth is expected to be strong due to improving margins as raw material prices cool off. Demand revival could also be seen that had moderated since Q3FY23.
On the economic data front, India’s S&P Global Manufacturing PMI data for March is to be out on April 3. S&P Global Services PMI and S&P Global Composite PMI for March are to be released on April 5. Investors will be watching data on US inflation for clues on the path forward for monetary tightening, as Federal Reserve officials continued to stress the need to lower prices. S&P Global Manufacturing PMI and ISM Manufacturing PMI will be out on April 3. Initial Jobless Claims will be out on April 6 and unemployment Rate and Non-Farm Payrolls on April 7.
Meanwhile, OPEC+ announced a surprise oil production cut of more than 1 million barrels a day, abandoning previous assurances that it would hold supply steady and posing a new risk for the global economy. Oil futures soared as much as 8 pct at the open on Monday. On the technical front, markets broke a 3-month of losing streak after Nifty managed to post monthly closing above 17,300 and formed a Doji star on a monthly candlestick chart, often seen as an end to a consolidation setup. The sharp fall in India VIX below 14.3 is seen as a trigger for a major breakout in the Nifty 50 Index with a potential target of 19,500 in the coming months. In the coming week, we expect the positive momentum to accelerate further once Nifty takes out the psychological barrier of 17,500.
Disclaimer: The views expressed in the blog are purely based on our research and personal opinion. Although we do not condone misinformation, we do not intend to be regarded as a source of advice or guarantee. Kindly consult an expert before making any decision based on the insights we have provided.
