Market Outlook

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Market last week

Positive momentum instilled by corporate tax cut influenced market sentiment this week. Nifty gained by ~2% led by short covering and selective buying in those stocks which are biggest beneficiary of the tax cut. On global front, hints of a trade deal and drop in oil prices added additional momentum.

The rally continued as fiscal measures will boost GDP growth in H2FY20 and push in corporate earnings enthused the market. Banks outperformed, while mid & small cap witnessed strong bargain buying in expectation of turnaround in consumption story and improvement in balance sheet. Further, in continuation with reforms, talks of strategic divestment in public sector units including OMC major BPCL evoked rally in these stocks. If these divestments go through will reduce the fiscal burden of the government. Private banks, FMCG and Oil and Gas were key outperformers while PSU bank and Pharma underperformed.

Week ahead

Investor’s sentiment has turned upbeat as earnings are likely to improve in near term and we may might see some upgrades. In the long-term we can expect more gains led by cumulative benefits from monetary and fiscal stimulus announced by RBI & FM in the last two to three months. We expect this positive momentum to continue in medium term followed by higher inflows from FIIs and DIIs and we are likely to outperform other Asian peers and emerging markets. For the week ahead September auto sales & RBI policy meet are the key events. A muted trend may happen in the short-term as market is considering if RBI may change its stance given a deep cut in tax revenue impacting fiscal strength of the government. Bond yields are inching up marginally stating some concerns which was dovish last week.

Posted: September 30, 2019

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