Global macro data and policy meetings to drive markets this week

This week, we expect market momentum to continue with Nifty heading towards its previous highs in the coming weeks. The index is now just 380 points or 2 per cent away from its lifetime high of 18,888. With result season nearing its end, the focus will now shift to global macro data, US debt negotiations and upcoming central bank policy meetings.

Among the key economic data that would be released during the week and would be keenly tracked are India’s Q4 GDP and infrastructure output along with monthly auto sales numbers. The US would release consumer confidence, manufacturing PMI and unemployment data. Europe will come out with inflation numbers, while manufacturing PMI data for China, UK and Europe would also be watched.

US legislators continue with their negotiations even as the US debt ceiling deadline is appearing closer on June 1. Further, US and European markets would remain closed on Monday providing little direction to global equities at the start of the week.

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Last week, we saw Nifty making smart gains of 296 points (1.6 per cent) to close at 18,499 levels and wiping off its previous week’s losses. Despite weak global cues, Indian equities performed well with every dip being bought into. Positive momentum continued in the broader market with Midcap 100/Smallcap 100 up 2.7 per cent/1.2 per cent. Metals, Pharma, IT, FMCG and Realty were the major gainers for the week, up more than 3 per cent each.

FIIs have been consistently buying in Indian equities throughout last week. Overall they pumped in more than Rs 20,000 crore in May so far, its highest in the last six months. DIIs too have turned positive for the week. They bought nearly Rs 2,100 crore worth of shares in the last week.

On the sectoral front, technology, especially midcap IT stocks, hotels, real estate and tyre sectors were in momentum, while the financial sector faced a minor selling pressure.

The Midcap IT sector saw healthy traction on the back of better-than-expected results, strong revenue guidance and positive rub-off from good numbers announced by US tech major Nvidia. Tyre stocks were in momentum as they posted strong quarterly results on the back of soft raw materials prices (rubber), stable growth in the replacement segment and sustained demand in the OEM segment.

Travel and tourism-linked stocks are witnessing smart rallies in the last few sessions due to strong footfalls across tourist destinations in India with the ongoing summer vacation. Moreover, most of the hotel players like Indian Hotels, Lemon Tree, etc announced better than expected Q4 results due to rising occupancy, rate hike (ARR) and optimum utilisation.

The IMD in its recent conference forecasted a normal monsoon during June 2023. We expect sectors allied to monsoon to gain traction in the coming week.

Global markets were on edge last week as the ongoing debt negotiation failed to strike any conclusive outcome with the default date nearing. Also, the May FOMC meeting minutes were released during the week and did not provide any support to the market. The minutes showed a division in support for more rate hikes. However, economic data like an upward revision of US GDP growth in Q1, coupled with fewer-than-expected weekly initial jobless claims indicated a strong economy, thereby denting expectations for a rate pause next month.