Minor pause or trend reversal? – Weekly Market Newsletter

Minor pause or trend reversal? – Weekly Market Newsletter


Market Overview

After a monstrous rally in the last two weeks, the equity markets took a breather as increasing infections in the US and Fed’s tepid outlook on economic recovery spooked investor sentiments. Indian markets too followed suit and in addition to this, the rising number of infections has increased fear of lockdown re-implementation which impacted sentiments. On the positive front, the Supreme Court has asked the Telecom players to provide details on staggered payment of AGR dues. The operators also have to provide a timeline and securities that they can offer as guarantees in case they are allowed more time to pay the dues. The next hearing is on June 18th.

Further, S&P retained its credit rating on India at BBB- with a stable outlook and expects GDP to rebound to 8.5% growth in FY22 after a contraction of 5% in the current fiscal. While this news helped investors heave a sigh of relief, the Nifty and Sensex still ended with losses of 1.7% and 1.5%. Despite selling pressure in the frontline indices, the broader markets outperformed and ended flat to positive. Sector-wise, certain cyclical sectors like Metals, Banking, Capital Goods ended with losses. On the fund flow front, both FIIs and DIIs were net sellers to the tune of Rs. 1,700 cr and 400 cr.

Market Outlook

The recent run-up warrants a caution as while the economic growth is showing signs of recovery, it is still quite far away from the normal. The economic data worldwide (IIP, CPI, Unemployment etc) would be tracked as it would help in gauging the economic recovery. Further, the Bank of Japan monetary policy statement on June 16 would also be an important factor for global markets.

Back home, the government did not release the data on IIP and CPI (only part of data was released) which was scheduled on Friday and it needs to be seen whether they release the WPI data. Apart from this, as per news reports, the US government is mulling the idea of suspending H-1B and other work visas (to boost employment of US nationals) and if it is the case it would not be a good sign for the Indian IT sector. The earnings announcement from companies like Can Fin Homes, Cholamandalam Finance, CSB Bank, Pfizer, Shopper Stop, Tata Motors, HPCL, Ipca Labs, Bank of Maharashtra, Cummins, IGL, Muthoot Finance, REC, LIC Housing Finance, JK Cement would be tracked.

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