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Daily market commentary 05 August 2022 by Mr. Siddhartha Khemka, Head - Retail Research, Motilal Oswal Financial Services Ltd.

Nifty opened higher and traded in a narrow range after RBI increased repo rate in line with market expectation. The index closed in positive territory near previous day close at 17398 levels. Broader market too ended flat to positive. Sector wise it was mixed. IT, Realty, FMCG Private Bank and Financial Services were gainers, while Consumer Durables, Auto, Metals, Oil & Gas and PSU bank were laggards

Global markets were lackluster, as investors remained cautious ahead of U.S. jobs data expected later in the day.

RBI hiked the repo rate by 50bps to 5.4% in an effort to contain inflation. Despite this, it has retained the CPI inflation forecast at 6.7% for FY23. However, it expects India’s GDP growth to remain strong at 7.2% in FY23. With capacity utilization in manufacturing sector being above long term average and improvement in new orders in Q2FY23, this would fuel additional capex requirement. This along with commodity prices cooling off (including crude oil), would support strong GDP growth

Nifty has been consolidating below the 17500 mark for last few sessions, after rising up by almost 1000 points in the previous week. At current levels, Nifty trades at 20x FY23 PE, which is above its 10-year average, thus offering limited upside in the near term. Despite mixed global cues including geopolitical tensions and higher volatility, Indian markets are holding out well with strong buying emerging at lower levels. While the pace of momentum may slow down, we expect market to maintain its positive bias in the near term.

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