Bulls raged on Dalal Street on Thursday as benchmark indices jumped more than 1.5%, tracking positive global markets after FOMC raised interest rates by 75 bps on expected lines taking its benchmark rate to a range of 2.25% to 2.5%. Sensex was up 1,051.61 points or 1.88% at 56,867.93, and the Nifty 50 surged 283.90 points or 1.71% at 16,925.70. So far in the month of July, both indices have surged nearly 5% each, their biggest gain in 11 months, led by a buying in banking, auto and consumer sectors with the hope of global central banks going slow on rate hikes. Softening of commodity prices along with slowdown of FII selling has also helped improve the investor sentiment.
Except IT, Oil & Gas, all Nifty sectoral indices gain in July
Except Nifty IT, Nifty Oil & Gas index, all the sectoral indices have inched up in July 2022. Nifty IT dropped 1.52% amid rising concerns of supply side shortages, fall in margins, higher attrition, rising sub-contractor & travel costs, rise in interest rate in the US, and recession expectations along with geopolitical tension in client-centric regions, according to. Meanwhile, the Nifty Oil & Gas index lost 0.65% during the month as the sector has been under pressure with refining margins coming off sharply in the last couple of weeks and when the government imposed additional duties.
Relief rally may continue, but volatility will remain elevated
“The FOMC policy statement and press conference had enough for both – the pessimists and optimists. They did point out that inflation remains elevated and that finally that price stability is paramount. At the same time, there was also a clear acknowledgement and indeed an implied promise that there is one eye on growth risks. In essence, markets can expect a “central bank put” at an appropriate time. We think the relief rally may continue and remain data dependent till the next policy meet in September.” Unmesh Sharma, Head- Institutional Equities, HDFC Securities told FinancialExpress.com.
However volatility will remain elevated due to our belief that the fight against inflation remains a long and arduous one. We continue to pick stocks on relative value (low vs high PE) and long-term thematics (financial inclusion and the government’s focus on manufacturing and industrials),” he added.
Fed commentary on rate hike to have positive implications for equities globally
Parth Nyati, Founder, Tradingo, said, “The US Fed announced a 75 bps rate hike yesterday which was in line with the market expectations. We believe that the Indian markets have already priced in the hike and the impact is going to be minimal. However, the market expects the rates to stabilize around the ~3% levels by the year-end and any negative surprise could be perilous for the global as well as Indian economy. FED through its commentary has made markets believe that this interest rate upcycle may not last long contrary to what was estimated before. This may have positive implications for equities globally.”
Nifty could attempt a rally towards 17000-17030 zone
“Tracking the overnight rally across Wall Street, Indian markets have rallied sharply today with the Nifty index surging to its highest level in nearly 3-months. The advance has been broad-based, with all sectoral indices trading in green led by sharp gains among finance and IT stocks. With global sentiment positive, the Nifty could attempt a rally towards the 17000-17030 zone, which is an important resistance area to keep an eye on as it marks the confluence point of the 200-day moving average and the 61.8% Fibonacci retracement of the April to June decline. Support for the index is now placed at 16800 levels,” said Abhishek Chinchalkar, Head of Education, FYERS.
Stick to stronger sectors; use dips to add quality stocks
“Markets have recovered strongly from the June low and sectors such auto and FMCG led the rebound. We’re now seeing banking and financials adding to the momentum while the laggards like IT and energy are still struggling. Participants should stick with the sectors which are relatively stronger and use intermediate dips to add quality names instead of focusing on the underperformers,” said Ajit Mishra, VP-Research at Religare Broking.