With earnings season behind, markets may follow global cues

Volatility in markets continued over the past week with indices closing marginally lower. The benchmark BSE Sensex ended down 0.14%, while the Nifty settled 0.2% lower.

“Equity market in India posted negative returns this week, with the majority of indices posting a decline. With Q2FY23 earnings season behind, the market focus now completely shifts towards domestic and global macro factor,” said Shrikant Chouhan, head of Equity Research (Retail), Kotak Securities Ltd.

In the US, comments from Federal Reserve speakers hinted at further interest rate hikes, which added to nervousness among market participants. Post witnessing some decline earlier this week, the US 10-year treasury yield thereby moved higher on Thursday. 

On the positive side, India’s October CPI inflation fell to 6.77% due to a favorable base effect. Domestic inflation is expected to moderate gradually, while crude oil prices corrected this week, lending some support to Indian markets.

Markets would track developments in Europe and the statements from leading Fed officials on the future stance of the central bank, said Joseph Thomas, head of research, Emkay Wealth Management. 

Though price pressures have ebbed, retail inflation numbers are too high for the comfort of the central banks, especially in the US and India, feels Thomas. At the same time, the prominent view is that inflation has probably peaked and that central banks might still hike rates but the quantum of hikes would be more moderate, he added. 

Some signs of sluggishness in growth could set in soon due to the aggressive rate action in the last few months and markets would focus on the actual numbers to get a sense of the trajectory of inflation and official policy as well, said Thomas

Sensex had breached 62000 levels and was very close to its all-time high of 62,052 a couple of days ago. Nevertheless, Friday saw a correction and Sensex ended at 61663.48 levels and slightly lower than 61705 levels it had closed on the previous Friday. Nifty at 18307.65 also ended marginally lower compared to last Friday’s close of 18349.70.

 “The equity markets were trading close to their lifetime highs this week and we had expected some level of cautiousness coming in. While the domestic data has been encouraging, given that we are trading at high valuations, some of the news coming in from across the globe indicates consolidation at the current levels,” said Sumit Chanda, CEO & founder of AI-based investment advisory platform, Jarvis Invest said. He expects short-term volatility, but given the recent India inflation data, the medium to long-term outlook is seen positive.