Market preview: RBI rate decision, corporate earnings to set tone

The Indian equity markets witnessed a euphoric rally and the best ever performance of both the indices in the last three months previous week. Both the indices hit fresh lifetime highs. Nifty gained through out the week and ended at the highest level of 11278, with a gain of 2.44% week on week. The mid- and small-cap indices also showed decent performance and gained 4% and 5.3%, respectively.

All the sector indices ended in the green, except the Information Technology (IT), which lost 1.25%. Bank Nifty gained 2.83% and closed at a life high of Rs 27,635, led by the public sector banks (PSB). PSBs rose 10% ahead of the Reserve Bank of India (RBI) policy, the expectation of better Q1 results and stable asset quality of banks. Metals also gained 6.65% on signs of easing trade war between the US and European Union.

After a very long time, the foreign institutional investors (FII) turned net buyers in equities and bought shares worth Rs 2,360 crore while the domestic institutional investors (DII) sold equities of Rs 1,574 crore.

In the last week highlights, all the companies showed very stable performance in their Q1 earnings except few auto companies. Bajaj Auto, Maruti and Hero Motocop disappointed on the margin front in their Q1 results. Bajaj and Hero were the major losers while UPL gained 15% post the formal announcement of acquiring global company Arysta LifeScience for $4 billion. ITC gained 10.50% post the results. Reliance Industries too declared its highest ever quarterly profits last Friday.

The key global events to watch for this week include the Bank of Japan policy releasing today followed by the US FOMC (Federal open market committee) meet and vehicle sales on Wednesday. The US jobless claims and unemployment data will be announced on Thursday and Friday respectively. Domestically, India’s June month infrastructure output and Q1’18 fiscal deficit data will be declared on Tuesday. The RBI monetary policy meeting will be held on Wednesday. All the 2W and 4W automobile companies will release their July month sales data during the week.

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This week, markets will take cues from the RBI and FOMC rate decision along with the corporate earnings. The auto sales numbers may weigh to change the mood of the markets. Till then, bulls have a strong grip. Technically, the 50-share index has broken all resistance levels and has entered a new price orbit. Nifty has support at 11150 and 11100 while resistance at 11500 level.

By Yogesh Vinod Mehta
(The writer is VP-retail research, Motilal Oswal Securities Limited)

Source: DNA