The benchmark Sensex and Nifty rose 4% each in the last six trading sessions. So far this year both were down 9% each.
The Indian market has traded in the green for five out of six sessions tracking gains in global equities and positive news on recovery in monsoon, decline in crude prices and metal prices. The benchmark Sensex and Nifty rose 4% each in the last six trading sessions. So far this year both were down 9% each.
“Gains in the global markets after Recent positive news on recovery in monsoons, decline in crude prices and collapse in metal prices raises hopes about domestic inflation peaking over the next few months and trending down in the second half of FY23. Inflation remains the key variable for global and domestic markets and any signs of easing in inflation will likely provide a cap to bond yields and a bottom to markets. Of course, upside risks to inflation remain apart from risks from policy mistakes.”. said Kotak Institutional Equities in its recent note to investors.
1: Crude: Brent crude has fallen over 10% in the last ten sessions from its record high of $123 a bbl. Oil’s rally went into reverse earlier this month on escalating concerns over global slowdown as central banks including the Federal Reserve boosted interest rates to quell raging inflation. Prices have sunk despite signs that energy markets remain tight in the near term as the war in Ukraine drags on and supply risks persist.
2: Sharp selloff in metal: The collapse in metal prices over the past month may help keep inflation in check over the next few months assuming prices do not spike again. “The sharp price declines in commodities reflect growing concerns about a recession in Europe and the US in 2023. A mild recession in DM countries need not be bad for India as it will result in softer commodity prices and lower imported inflation”, Kotak report said.
3: Monsoon: A revival in monsoons over the last fortnight after a late start raises hopes of a normal monsoon, in line with the forecasts of India’s met department. “We note that high food inflation has been one of the drivers of overall inflation over the past few months. However, the bulk of inflation is largely due to seasonal items such as fruits and vegetables and a good crop output in the next season will hopefully bring down prices while keeping prices of food-grains and other food items in check”, Kotak report added.
4: Strong key numbers: Few sectors like factory output data, Air passenger and tax collections showing strong growth in the Indian economy. Factory output growth rose to an eight-month high of 7.1% from a year ago, led by a double-digit increase in electricity production, while manufacturing and mining also expanded at a healthy pace. A similar trend was seen in the output growth of eight infrastructure industries, which increased to 8.4% from 4.9% in March.
Domestic air passenger traffic saw a strong recovery in demand as Indian carriers flew 1.20 crore passengers on the local routes in May, logging nearly five-fold year-on-year volume growth, DGCA data showed. Net direct tax collections for the current fiscal year surged 45 per cent to Rs 3.39 trillion between April 1 and June 16, compared to Rs 2.33 trillion in the same period a year ago, the Central Board of Direct Taxes (CBDT) said