Global data, RBI meet to drive markets

This week, global markets would react to the key US monthly jobs data which was released on Friday evening while keeping an eye on US Fed Chair Jerome Powell’s speech due on Tuesday. Also, UK will announce its GDP data for the fourth quarter. On the domestic front, the Reserve Bank’s monetary policy on Wednesday would hold importance, as the market expects the last leg of rate hike at 25bps in this meeting. Apart from these economic events, the result season enters into another busy week by the end of which most of the Nifty results will be out. Banking sector will react to SBI and BoB results which reported healthy Q3FY23 numbers while the cement sector will be in focus on the back of Dalmia Bharat and Birla Corp results.

The domestic equities managed to close on a positive note despite huge volatility and FII selling witnessed during the last week on account of various global and domestic events. It recovered on the last day after some respite was seen in Adani group stocks. Nifty finally ended the week with gains of 250 points (+1.4%) to close at 17,854 levels. Broader market too gained with Midcap100 and Smallcap100 up 0.5% and 1.9% respectively, for the week. FMCG, IT and Auto were the major gainers for the week. Even PSU banks saw refresh buying after BOB reported healthy Q3FY23 numbers while expectations were running high of good results to be reported by SBI on Friday evening.

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During the past week, three central banks announced their interest rate decisions with their tone turning dovish, which boosted market sentiments. US Fed chairman’s dovish commentary and in-line interest rate cut (25bps) lifted the US market to a 5-month high. Nasdaq Composite climbed up by 5% after the Dollar Index fell to 10-month low and tech giants posted better than expected quarterly results. Federal Reserve comments suggested its aggressive cycle of rate hikes is coming to an end with ~5% interest rate in 2023 (currently 4.75%). Even Bank of England and ECB gave dovish commentary while hiking rates by 50 bps.

The Adani saga continued for the second week in a row with many group companies witnessing more than ~50% fall in their stock prices. However, on the last day of the week, it witnessed some recovery, providing support to the market pullback.

The Union Budget 2023 was presented last week by the finance minister amid high expectations since this was the last full budget before 2024 general elections, and it was expected that the government could announce some income support for the rural sector or implement some measures to boost consumption growth in the economy. It however, demonstrated continuity and build up on last year’s budget announcements with intensifying focus on capex.

The government did not give in to the populous expectations and continued with its investment-led spending growth strategy along with modest fiscal consolidation. Fiscal deficit is estimated at 6.4% and 5.9% of GDP in FY23 and FY24, respectively. Overall, from an equity market perspective, we believe the budget was balanced and had no unpleasant surprises. Sectors likely to benefit are, Auto, infra, capital goods and housing.

(The author heads retail research at Motilal Oswal Financial Services Limited)