Market Outlook by Vinod Nair

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Market this week

Despite a data driven week like domestic inflation & IIP and USFED policy meet, domestic market started-off on positive note on expectation of favorable outcome. Further, positives from US-North Korea summit boosted global market sentiments.

A 25bps rate hike from US FED was largely factored in the market, but the FED’s language indicated two more hikes in 2018, which dented market’s sentiments. Further escalation of trade tensions between US and China added cautiousness. On domestic front, IIP rose by 4.9% however CPI inflation inched higher to 4 month high to 4.87%. WPI increased to 4.43% in May and trade deficit widened, leading to consolidation in markets. The saving grace for the market was rally in Pharma & IT led by value buying and positive USFDA approvals and INR deprecation.

Week ahead

Global central banks are on a path to tighter monetary policy which has outlined in USFED and ECB policy meet is expected to hurt emerging market inflows.  Further escalation of trade tensions is likely to impact the near term market sentiments.  Defensive sectors like IT and Pharma may remain attractive in the near term. Market will closely follow OPEC & Russia meeting next week, to decide on relaxation of supply cuts.

Posted: June 2018

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