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Below is the Daily Market Commentary 30 September 2021 By Mr. Siddhartha Khemka, Head - Retail Research, Motilal Oswal Financial Services Ltd

Indian markets opened flat and was range-bound in the initial half but gave in to profit booking in the latter half to finally end in red. Sectorially, it was a mixed bag, with buying seen in the realty, pharma, power, consumer durables, and PSU banking stocks, while selling was seen in the auto, bank, IT, metal. Broader market continued to outperform benchmark indices.

Global cues were mixed as US lawmakers have reached an agreement to extend the federal  government's funding through December, thus averting the risk of shutdown from tomorrow, but the fate of two major spending bills is still in the balance. Dollar continued to strengthen amidst fears for growth in China, and the uptick in risk aversion triggered. Investors are now awaiting US GDP data along with Jobless claim data which would be released later during the day. On the other hand, China released weak manufacturing PMI data, while Evergrande Group's debt woes continued, with the People’s Bank of China injecting liquidity into the financial system. China's finance ministry also published draft rules on the accounting of asset management products, thus, making investors cautious as doubts about China’s economic expansion remain. European markets however, stabilized after the sharp losses earlier this week, helped by stronger than expected U.K. second-quarter growth and a sharp jump in French consumer spending.

Markets are likely to continue with its consolidation given the sharp run-up in the past few weeks and weak global cues. Though the US funding has been extended temporarily, worries over federal government paralysis and the withdrawal of monetary support persist. Moreover as the energy crisis continues, the oil and gas prices along with power prices continues to remain elevated. China’s slowing economic growth along with debt woes continues to be a matter of concern. However, the domestic cues remain positive as the Covid cases continues its decline further (daily cases falling to below 20k) resulting in more relaxation of economic activities with Key state Maharashtra opening up from October. Investors would react to the auto monthly sales numbers which would start kicking in from tomorrow. Rotation from outperforming sectors to under-valued stocks continue as the valuations continue to be at stratospheric levels. Small traders should trade cautiously as markets could be volatile amidst weak global cues. Investors can tap this opportunity to adopt buy on dip strategy as the long term fundamentals remain intact.

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