Market Outlook by Vinod Nair

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Market this week

This week benchmark indices witnessed a relief rally as oil prices fell from 80$/bbl to 76$/bbl on expectation of increase in supply by OPEC and Russia which has mildly improved sentiment. Positive global cues, optimism on a favorable monsoon and short covering due to F&O expiry helped market to gain some momentum. The 10 year yield inched lower while rupee gained some traction. Further, better than expected Q4 GDP growth of 7.7% lifted investor’s sentiments. However market witnessed volatility due to weak Q4 results and higher retail fuel prices, adding inflationary pressures. PSU banks underperformed after recent rally, while auto and private sector banks witnessed buying interest.  Mid and small-caps underperformed due to concern on valuation and fear of downgrade in earnings post results.

Week ahead

Year till date, from the respective 52 week high indexes like Nifty50 had corrected by -8%, Nifty Midcap100 by -15% and Nifty Smallcap100 by -20%. After this strong correction, prices had become very attractive and valuation had reduced marginally. However with Q4 results below estimates, FY19 estimates are likely to be downgraded. Next key event for market is RBI policy meet next week and consensus is showing status quo on rates. While Investors are gradually factoring interest rate hike from RBI in CY18 on the back of volatility in oil price and risk of inflation.

Posted: June 2018

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