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Market Review

​​​​​​​​​​​OVERVIEW OF MARKET

Nifty rose ~6% during the month closing at new life time highs; market direction was largely led by corporate earnings, MSP announcement and easing crude prices. Crude price fell by ~6.5% and closed at $74.3 due to concerns of oversupply. On the domestic front, inflation continued its northward journey alongwith widening trade gap. Among the sectors, Energy and FMCG outperformed while Metals, Pharma and Infra underperformed the Nifty during the month. FIIs turned net buyers to the tune of about Rs 517 cr, while domestic mutual funds bought around Rs 5,460 cr of equity during the month.

The Index of Industrial Production moderated to 3.2% in May compared to 4.8% in April. CPI inflation inched higher to 5.0% in June against 4.9% in May. WPI inflation rose sharply to 5.8% in June as against 4.4% in May.

The Bond market rallied during the month of July 2018. The benchmark 10 year G-Sec (7.17% GOI 2028) closed 13bp lower at 7.77% against 7.90% last month.

Outlook

In absence of any major domestic and international events, Fixed Income market moved in a narrow band during the month. Though June CPI inflation continued its northward journey with higher headline print (5%) and higher core inflation (6.45%), market did not react to that. Market also remain immuned to recent currency weakness with rupee creating fresh all time low of 69.13 per US$. On the contrary, market took comfort from lower crude price. Month on month basis, yield softened with an eye on the outcome of important Domestic (RBI MPC policy review) and International events (FED and other major global central bank policy review) in the month of August. However, over the medium term, the direction of interest rates will depend upon likely infusion of sizeable permanent liquidity by RBI through OMO purchase of Government Securities, inflation trajectory, Government’s revenue collections, global yield movement and investor appetite.

Outlook​

We retain our positive outlook on retail banks, IT and consumer staples and discretionary space. Earnings in consumer space, even adjusted for a favourable base, reflect a meaningful pick-up; recent GST cuts should provide a further stimuli. IT space started to show pick-up in response to improving global demand scenario and depreciating INR. In addition to strong numbers reported by retail banks, the commentary of large corporate banks have turned positive reflecting move towards banks’ asset quality resolution. Market is likely to remain in uptrend supported by improving earnings and strong domestic inflows. Pick-up in consumer spending, rural demand and improvement of banks’ balance sheets are the key medium-term positives for markets. Escalating trade tensions, oil prices, weakening Indian macros remain key risks to the market.​​

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