Mood turns cautious on global cues
Markets turned cautious during the week as inflation fears persisted and expectations grew that the U.S. Federal Reserve would tighten policy in the coming months along with concerns about the prospect of higher borrowing costs, a possible US debt default. In China, worries about the potential impact of a widening power shortage and Chinese property group Evergrande’s ongoing debt crisis too worried global investors. The Nifty ended lower by 1.8 pct to 17,532 levels while the broader markers remained firm with the NSE Midcap 100 and NSE Smallcap 100 gaining 0.8 and 0.6 pct respectively for the week. The Brent crude traded near the USD 80 bbl mark while WTI traded near the USD 76 a bbl mark as reports that China was prepared to buy more oil and other energy supplies to meet growing demand offset price pressure from an unexpected rise in U.S. crude inventories and a strong dollar.
Stock specific action
- Coal India gained after a private report that India’s massive fleet of coal plants are running dangerously low on stockpiles, which may force the nation to buy expensive shipments of the fuel or else risk blackouts.
- Maruti Suzuki was in focus after it announced that it was expecting total vehicle production in October at two of its plants to be around 60 pct of normal levels due to a global chip shortage. This is a slight improvement over the 40 pct production level seen in September.
- Oil India and ONGC gained after domestic gas price has been raised to USD 2.9/mmbtu for 2HFY22 (vs USD 1.8/mmbtu in 1HFY22) – this is based on the domestic gas price formula.
- Hotel industry’s stocks remained in action as Icra’s report stated that the hotel industry is expected to clock at least 45-50 per cent of pre-Covid revenues in this financial year.
- Multiplex operator stocks like PVR and Inox Leisure were in the limelight after the Maharashtra government announced the opening of cinema halls and multiplexes in the state from October 22.
- Zee Entertainment could trade lower in the coming week after its board said that it will not convene the extraordinary general meeting (EGM) called by Invesco Developing Markets Fund on the lines “requisitioned by” it and termed it invalid.
On the macro front, the growth of eight core infrastructure industries grew by 11.6 pct in August 2021 as compared to the same month last year mainly due to an uptick in the production of cement, coal, and natural gas. Manufacturing Purchasing Managers’ Index (PMI) survey, manufacturing PMI stood at 53.7 in September, up from 52.3 in August. India’s external debt stood at USD 571.3 billion at the end-June, recording an increase of USD 1.6 billion over its level at the end of March 2021.
RBI Policy In focus for the coming week
The coming week is expected to remain volatile ahead of RBI’s Monetary Policy outcome on October 8. The RBI is likely to keep its stance accommodative and maintain surplus liquidity in the system. Apart from this, OPEC+ meeting on Monday and the US Non-Farm Payrolls data on Friday are the key events that will be watched in the coming week. We continue to remain cautious in the markets on rising inflation (which could lead to global central banks rethink on their policy action), elevated commodity prices and an increase in crude oil prices which could impact the economy and corporate earnings.
Author: Nisha Harchekar – M.M.S (Finance) – 16 yrs+ experience as Equity Research Analyst
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