All Eyes Now Turn to the Clouds
The Nifty has rallied nearly 5 per cent from the lows of May 26 to the highs of May 30 and with this strong up-move, the index has filled its gap of May 6. Along with this, it has retraced about 38.2 per cent of the down-move which had begun from the first week of April to the lows of May 12. Thereafter, we have been in the middle of a very treacherous market. Where the moves have been so big or rather highly volatile, especially in the last leg of the trade, the pattern has not been restricted to Indian benchmark indices alone but also globally. As a result, this has made it quite difficult for traders to make any money.
The result is that it has been a very tough scenario for the market participants. This reminds us of the famous dialogue from the film ‘Rocky Balbao’: “It’s a very mean and nasty place and I don't care how tough you are. It will beat you to your knees and keep you there permanently if you let it. You, me, or nobody is going to hit as hard as life. But it isn’t about how hard you hit. It’s about how hard you can get hit and keep moving forward.” Meanwhile, talking about the news flow, it was a buzzing week. First, India released its Q4 gross domestic product (GDP) data
The country’s GDP growth slowed to a four-quarter low of 4.1 per cent during the January-March period versus 5.4 per cent QoQ and 1.6 per cent YoY. GDP for FY22 was at 8.7 per cent, below the 8.9 per cent projected by the Ministry of Statistics in February. Talking about the Reserve Bank of India’s GDP estimate of 7.2 per cent for FY23, as of now it looks very difficult to meet and there is reason enough. Crude oil is consistently trading above the mark of USD 110 per barrel mark after the EU announced that it will do away with 90 per cent of Russian oil by the end of this year. Moreover, JPMorgan CEO Jamie Dimon in his recent comments said that oil could hit USD 150 or USD 175 a barrel due to the Ukraine-Russia conflict.
Furthermore, with the news that China is easing pandemic-related restrictions and the economy is expected to gallop again, the demand from China for crude is expected to keep the oil prices firm. Some may argue that the move taken by the government to tame inflation is the right step and it may soothe the inflationary trend from H2FY23. Yet, crude could prove to be the snake in the grass. Talking about other news, the government’s GST revenue remained above Rs 1.4 lakh crore for the third consecutive month. Collections in Kerala jumped 80 per cent over the earlier year, the highest among major states on a law base due to the pandemic, whereas the quantum of collection was the highest in Maharashtra.
While on the topic of fiscal deficit, for FY22 it was at 6.7 per cent of GDP versus the estimated 6.9 per cent of the GDP. From outside India the news is that JPMorgan CEO Jamie Dimon has warned that an economic ‘hurricane’ is coming, but at the same he said, “We just don’t know if it’s a minor one or a super storm or something like that. You better brace yourself.” Going forward, all eyes will be on the meet of the Reserve Bank of India (RBI). Of course, there is the RBI interest rate hike this month too but then hasn’t the market already discounted this? However, the commentary would be important.
Most importantly, the onset of the monsoon season will be the most ‘looked forward to’ event of this month. The India Meteorological Department has predicted a normal monsoon. But obviously, this will help automatically decrease the pressure brought on by inflation. A lot hinges on a normal monsoon this year as it would lead to a good harvest and good income for farmers, which in turn will push up demand. Technically, the bulls are likely to turn their stance from the back foot to the front foot once the Nifty sustains above the level of 16,750. Meanwhile, the India VIX has dropped 5 per cent on WTD basis and this is because all the vagaries are out in the open, including crude price, slowdown, rate hike, inflation, etc. Hence, market participants are less scared.
