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Daily market commentary 31 March 2023 by Mr. Siddhartha Khemka, Head - Retail Research, Motilal Oswal Financial Services Ltd.

Domestic indices ended the last day of the month on optimistic note led by rally in global markets and FIIs turning net buyers. Sharp decline in India VIX from recent high of 17 zones to 12.8 levels, too supported the markets. Nifty opened gap up and continuously strengthen throughout the session to close with handsome gains of 279 points (+1.6%) at 17360 levels. All sectors ended in green with Oil & Gas, IT and Realty being major gainers. Niche sectors like Sugar and Defence too were in limelight and we expect this momentum to continue. Large order inflows from government to various defence companies lifted the sector, while rally in sugar stock was seen due to increase in refined sugar prices and government’s thrust to double the ethanol blending by 2025. While Nifty ended FY23 on a flat note (-0.6%), Nifty midcap 100 closed with gains of 1%. However, Nifty Smallcap 100 succumbed to the global pressure - down 14% in FY23. In FY24, we expect strong earnings growth of around 15% – largely because of improving margins as raw material prices cool-off. This would be further supported by demand revival that had moderated out since Q3FY23. Valuation too has come off substantially from 24x 1-year forward P/E in Oct’21 to 17x currently (v/s 20x long period average), offering moderate margin of safety. In the near term, focus will now remain on RBI’s policy meeting next week, where 25-bps rate hike is expected in line with the hikes done by major global central banks. Apart from this, markets will also react to monthly Auto sales number data that will be released over the weekend.

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