Dalal Street Corner: Market ends with marginal cuts this week; FMCG gains, Consumer Durables decline—What should investors do on Monday?

The Indian market closed with less than half per cent cuts in the week ended July 1, 2022. Barometer indices Nifty50 and Sensex declined 0.3% each this week. The week saw the market ending in the red thrice, while it closed with gains on two occasions amid volatility.  

Nifty FMCG, Nifty Metal, BSE Power and BSE Utilities, which gained the most in the week gone by, ended higher by 2.5-3.1%.  

BSE Consumer Durables and Nifty200 Momentum 30 were top losers with 1.6% and 1.7% cuts.  

Meanwhile, the Indian market made a sharp recovery on Friday after declining by over one and half per cent in the morning trade due to additional excise duty on petrol, diesel and ATF and weakness in rupee. However, the headline indices ended marginally lower as the Nifty50 ended above 15,750 and the Sensex dropped just over 100 points. 

The weakness was visible in Nifty oil & gas as the index declined by over four per cent, dragged by Nifty heavyweight Reliance Industries and ONGC. RIL closed with more than seven per cent cuts, while the state-owned refiner ended lower by a whopping 13%, reacting to additional export duty.  

Another factor dragging the market was India’s factory output growth, which slowed during June.  

However, IT led FMCG pack, which gained nearly 3%, helped the Indian market from ending with sharper cuts.  

Meanwhile, Foreign Institutional Investors remained net sellers in June, offloading equities worth Rs 58,112.37 crore in the month. However, DIIs countered it with a net buy of Rs 46,599.23 crore in the month ended on June 30.    

On Friday's closing, the market breadth turned positive with 1,738 stocks gaining against 1,546 declining on the BSE. As many as 151 remained unchanged of the total 3435 stocks that traded on the BSE on Friday.  

Here is what experts have to say about today's trading session, and how the market is expected to behave going forward.  

Vinod Nair, Head of Research at Geojit Financial Services 

Unfavorable cues from the domestic market led to a weak start due to weakness in the rupee and selling in oil refineries as the government imposed an additional export duty on petrol and diesel. Adding to the weakness, India’s factory output growth slowed down during June, as high inflation continued to dampen demand. However, the FMCG sector witnessed strong buying supported by declining commodity prices on the belief that the prices have peaked out. 

S Ranganathan, Head of Research at LKP securities.  

As the street sets about pricing in the impact of the windfall gain tax on the Oil & Gas sector, benchmark indices displayed high volatility today primarily led by the Energy sector. The manner in which Bulls responded with the help of FMCG stocks led by ITC in afternoon trade left bears completely surprised as it helped Indices stage a breathtaking recovering by erasing all the days losses. 

Gaurav Ratnaparkhi, Head of Technical Research, Sharekhan by BNP Paribas 

The Nifty started the week on a strong note but couldn’t build upon the gains. It witnessed consolidation throughout the week and in the last session had sharp swings in both directions. Near term support zone was placed around 15700-15650, which the index breached on July 01 however received support near 15500. Overall structure shows that the index is likely to witness consolidation in the range of 15500-15900 in the coming sessions. It is expected to face selling pressure as it approaches 15900-16000 zone. On the other hand, dips towards 15600-15500 can be taken as buying opportunities. 

Kunal Valia, Chief Investment Officer – Listed Investments, Waterfield Advisors 

Given the risk emanating from a prolonged inflation, global central banks are moving towards normalising interest rates and quantitative tightening at a rapid pace. In such a scenario where not just the cost of capital is going up, but also the liquidity tap is drying up, outflows from emerging markets and risk assets are leading to excess volatility and drawdowns.  

Today the central banks are fixated on bringing down price pressures by aggressively raising rates. However, such measures are already having an adverse impact on consumer sentiment and housing prices. The next order impact will be slowdown or recession in some parts of the globe and thereafter, we will see growth-inflation equation back on the table for monetary policy makers and likely turn the table for flows to Strong Emerging Markets like India. 

V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services. 

With the economy showing signs of "gradual recovery despite global headwinds", the prospects for H2 appear better for markets. 

Leading indicators suggest improving prospects for banking, IT, telecom and autos. Stock price movements in the near-term in July will be in anticipation of better-than-expected Q2 results in these segments. Metals stocks are likely to bottom out absorbing the poor Q1 results. 

(Disclaimer: The views/suggestions/advice expressed here in this article are solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)