Indian equity benchmarks Sensex and Nifty declined during the week as market participants remained anxious over the data from the Reserve Bank of India (RBI) that showed India’s foreign exchange reserves fell to $532.66 billion, their lowest level since July 2020.
Markets extended losses on account of a weak set of macroeconomic data that dampened sentiments of investors. Retail inflation has remained above the RBI’s tolerance level of 6 per cent. Also, India’s industrial growth, as per the Index of Industrial Production (IIP), slid to an 18-month low of -0.8 per cent in August from 2.2 per cent in July. However, markets pared some losses on Friday with over a per cent gain each on the back of positive cues from global markets.
Key Indian equity benchmarks ended the passing week with a cut of around half a percent, the BSE Sensex slipped 271.3 points or 0.47 per cent to 57919.97 during the week ended October 14, 2022, while the Nifty declined 129 points or 0.74 per cent to 17185.70.
In its annual World Economic Outlook report, the International Monetary Fund (IMF) has cut its projection for India’s economic growth in 2022 to 6.8 per cent – a 0.6 percentage point downgrade since the July forecast. The IMF had in July projected a gross domestic product (GDP) growth of 7.4 per cent for India in 2022. Even that forecast was lower from 8.2 per cent projected in January this year. India had grown at 8.7 per cent in 2021-22 fiscal (April 2021 to March 2022).
Market veteran Vinod Nair, Head of Research at Geojit Financial Services, said: “During the week, investors have been risk-averse due to rising geopolitical turmoil as well as worries about the global economic slump. However, compared to global counterparts, domestic sell-off was not as aggressive since DIIs inflows supported FII selling. The domestic market also focused on quarterly earnings as the IT sector got off to a robust start, which improved the sector’s spirits.”
“Oil prices also decreased as a result of weak demand brought on by recessionary worries and tightening Chinese regulations, which marginally helped India. The US inflation data came slightly higher than expected, raising fears of an aggressive rate hike. However, the US market rapidly recovered due to the oversold trajectory and limited upside risk to the market and economy.”
Nair added, “We expect the rally to continue in the short-term, led by festival demand, Q2 results, and the positive trend of the global market. Buying at a dip is the best strategy in this scenario, with a focus on domestic economy-oriented stocks and sectors. The sectors which are expected to outperform are IT, pharma, FMCG, durables, green initiatives, specialty chemicals, and mass manufacturers with value buying as the theme.”
As many as 12 stocks in the Nifty 50 index delivered a positive return to investors in the passing week. With a gain of 5.9 per cent, Axis Bank emerged as the top gainer in the index. It was followed by HCL Technologies (up 4.7 per cent), Coal India (up 2.8 per cent), Sun Pharma (up 2.2 per cent), and Power Grid Corporation of India (up 1.6 per cent).
Infosys and Tata Consultancy Services (TCS) also advanced by over 1 per cent. On the other hand, Wipro, SBI Life Insurance Company, and Oil & Natural Gas Corporation (ONGC) declined 7.5 per cent, 5.1 per cent and 4.8 per cent, respectively. Sector-wise, the BSE Bankex index gained 0.6 per cent during the week gone by. BSE Information Technology index has also given 0.5 per cent return. In contrast, the BSE Realty, BSE Power, and BSE Oil & Gas indices declined by 4.2 per cent, 3.9 per cent and 3.2 per cent respectively.
Market Watcher S Ranganathan, Head of Research at LKP Securities, said: “With Inflation becoming the most widely watched economic statistic globally, yesterday’s inflation print in the US saw extreme volatility there, and as expected our markets opened gap up in sync with global cues. IT & Financials buoyed by earnings led the rally before profit-taking in energy stocks wiped off a bit of gain. The broader markets did see buying interest in select stocks on the back of quarterly earnings although the gains were visible only across large-cap names.”