Silver Lining amidst Dark Clouds

Professional tennis player Rafael Nadal defied his family’s wishes by battling through injury to record a remarkable comeback to beat Taylor Fritz in a fiveset quarter final thriller at Wimbledon. Similarly, the bulls also made a strong comeback on D-Street and decimated the bears with Nifty jumping almost 2 per cent in the last five trading sessions amid falling commodity prices, ease in overseas’ investor selling pressure and the lifting of rate hike worries, thus turning investors’ sentiment toward the positive. More importantly, if we check the current profile of the rally in the stock market, it is an encouraging one since it is broad-based and tells you that something is changing. 

Let’s dig some deeper and understand what factors are in the play against this backdrop? As fear of recession and global economic slowdown gripped investors across the world, commodities from crude oil to natural gas, copper to cobalt and nickel to palm oil to cotton crashed to multi-months lows. Talking about the FOMC meeting minutes, officials reiterated that they will have a tough stance against inflation but they also added that they might opt for another 50 or 75 basis points hike in the next meeting scheduled on July 26. 

But what really stood out in the last couple of days apart from the fall in the commodity prices is that first of all the selling by the FIIs has gone down quite a bit and secondly, the updates from corporates have been music to the ears of the bulls as Titan came out with a splendid business update where they said that it’s a near normal quarter after almost a twoyear gap and moreover, both walk-ins and buyers grew in line with revenues whereas size improved marginally compared to Q1FY22. 

Growth in plain gold jewellery was nearly three times and that’s something that the street will take with both hands. However, this good story doesn’t stop here as sales of residential units in India during the first half of calendar year 2022 hit a nine-year high. Further, FMCG companies are starting to see a favourable environment with the recent softening of palm oil prices and the forecast of a good monsoon season. But, here comes the thorn in the flesh. The US dollar got a boost of safe haven appeal and scaled to almost a two-decade high of 107.10 and alongside the Indian rupee is at its all-time low of 79.30 against the US dollar against the backdrop of strong American currency and persistent foreign fund outflows. 

However, the RBI is not sitting with hands on its head. In fact, on Thursday the RBI announced a series of measures to attract foreign inflows by relaxing norms for deposits by nonresident Indians and raising the limits for external commercial borrowings. Talking about the performance of various sectors, Bank Nifty has displayed overall outperformance vis-à-vis Nifty. Interestingly, the Bank Nifty index is now trading above its 20 DMA and 50 DMA and moreover, it has made successive higher highs-low from the past five trading sessions. 

Meanwhile, the Nifty Auto index has picked up momentum but is hovering around key resistance of the 12,140 mark. Closing above this mark would result in a multi-year breakout in the index and it may reward investors with handsome gains. Among other sectors, FMCG and realty still look upbeat and may gain further momentum on the upside. Going forward, all eyes would be on TCS, which will officially set afire the ceremonial starter’s pistol for the first quarter corporate earnings’ season on July 8.

The street will spy with one big eye on the management commentary, primarily on future outlook, attrition rates and deal momentum. We expect the demand outlook to remain healthy but moderation in the sequential revenue growth of IT companies is quite likely amidst pressure on margin from elevated wage increases. The Q1 earning season will be quite significant as is against the backdrop of the scorching inflation conditions which should ideally determine just how well or poorly companies are able to deal with inflation. Apart from this, the stock market movement would be guided by key macro data like inflation and industrial production as well as global cues.

Professional tennis player Rafael Nadal defied his family’s wishes by battling through injury to record a remarkable comeback to beat Taylor Fritz in a fiveset quarter final thriller at Wimbledon. Similarly, the bulls also made a strong comeback on D-Street and decimated the bears with Nifty jumping almost 2 per cent in the last five trading sessions amid falling commodity prices, ease in overseas’ investor selling pressure and the lifting of rate hike worries, thus turning investors’ sentiment toward the positive. More importantly, if we check the current profile of the rally in the stock market, it is an encouraging one since it is broad-based and tells you that something is changing. 

Let’s dig some deeper and understand what factors are in the play against this backdrop? As fear of recession and global economic slowdown gripped investors across the world, commodities from crude oil to natural gas, copper to cobalt and nickel to palm oil to cotton crashed to multi-months lows. Talking about the FOMC meeting minutes, officials reiterated that they will have a tough stance against inflation but they also added that they might opt for another 50 or 75 basis points hike in the next meeting scheduled on July 26. 

But what really stood out in the last couple of days apart from the fall in the commodity prices is that first of all the selling by the FIIs has gone down quite a bit and secondly, the updates from corporates have been music to the ears of the bulls as Titan came out with a splendid business update where they said that it’s a near normal quarter after almost a twoyear gap and moreover, both walk-ins and buyers grew in line with revenues whereas size improved marginally compared to Q1FY22. 

Growth in plain gold jewellery was nearly three times and that’s something that the street will take with both hands. However, this good story doesn’t stop here as sales of residential units in India during the first half of calendar year 2022 hit a nine-year high. Further, FMCG companies are starting to see a favourable environment with the recent softening of palm oil prices and the forecast of a good monsoon season. But, here comes the thorn in the flesh. The US dollar got a boost of safe haven appeal and scaled to almost a two-decade high of 107.10 and alongside the Indian rupee is at its all-time low of 79.30 against the US dollar against the backdrop of strong American currency and persistent foreign fund outflows. 

However, the RBI is not sitting with hands on its head. In fact, on Thursday the RBI announced a series of measures to attract foreign inflows by relaxing norms for deposits by nonresident Indians and raising the limits for external commercial borrowings. Talking about the performance of various sectors, Bank Nifty has displayed overall outperformance vis-à-vis Nifty. Interestingly, the Bank Nifty index is now trading above its 20 DMA and 50 DMA and moreover, it has made successive higher highs-low from the past five trading sessions. 

Meanwhile, the Nifty Auto index has picked up momentum but is hovering around key resistance of the 12,140 mark. Closing above this mark would result in a multi-year breakout in the index and it may reward investors with handsome gains. Among other sectors, FMCG and realty still look upbeat and may gain further momentum on the upside. Going forward, all eyes would be on TCS, which will officially set afire the ceremonial starter’s pistol for the first quarter corporate earnings’ season on July 8.

The street will spy with one big eye on the management commentary, primarily on future outlook, attrition rates and deal momentum. We expect the demand outlook to remain healthy but moderation in the sequential revenue growth of IT companies is quite likely amidst pressure on margin from elevated wage increases. The Q1 earning season will be quite significant as is against the backdrop of the scorching inflation conditions which should ideally determine just how well or poorly companies are able to deal with inflation. Apart from this, the stock market movement would be guided by key macro data like inflation and industrial production as well as global cues.