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Below the Perspective on markets By Mr. Jaykrishna Gandhi, Emkay Global Financial Services

The Nifty recovered from lower levels, ending with a gain of 0.33% at 22,096.75 in the last week. All the sectors participated in the upward movement except Nifty IT which tumbled nearly 6% ( largely impacted by the lower-than-expected guidance by Accenture). The overall market rally was largely fuelled by the US market reaching record highs, boosting confidence in the domestic market.

Looking ahead, major support for the Nifty is expected around the 21,800 level while resistance is seen around 22,350 for the upcoming week. The specific performance in stocks will play a crucial role in driving the market's direction in the coming days. OIL, that continued its steady move higher and now closing in on $87/bbl. , remains to be a key factor to look at in the near term. The geo-political tensions and OPEC supply cuts have steadied OIL and may remain a headache from the stickiness of inflation point of view. From INDIA perspective, higher OIL price would exert pressure on the OMCs margins and input cost for certain industries.

On the global front ,FOMC made minor changes to the INFLATION forecasts, raising headline PCE forecasts by 20bps for 2024, while raising the GDP estimates to 2.1% (vs 1.4%). Unemployment rate was projected at 4.0% (vs 4.1% earlier and 3.9% currently). Chair Powell also talked about slowing the pace of Balance Sheet run – no decisions there yet, but at some time, it would be appropriate to slow the pace down. All in all, a decent outcome from Risk perspective – BOJ did lift off but continued with their QE; FOMC didn’t alter their projections on rate cuts and sounded confidence on achieving their Inflation targets and raised Growth estimates. Meanwhile, the strong earning and commentaries from the SEMI/CHIP names continued – last being a blowout results from MICRON, riding the strong demand for their HBM chips.

At home, the latest CAD data indicates , improving goods trade deficit and solid services trade surplus. The boost in capital account surplus (USD17.4bn, 1.9% of GDP vs. 1.5% in Q2FY24) was led by massive net FPI flows (USD12bn vs. USD4.9bn in Q2) with debt flows nearly 3x of Q2, ahead of India's bond index inclusion.  FY25 CAD/GDP will likely see the rub-off effect structurally improving the external sector and could stay at 1.1-1.2%. However,  we expect INR to have a non-linear movement , ranging 82.50-84.25 for Q1FY25.

A truncated week , we expect the short-term trend in Nifty to be positive. A sharp move above the hurdle of 22200-22300 levels could pull Nifty towards new all-time highs around 22550 levels. A reasonable bounce in midcap and small cap  ( ~5% from March 15 lows) also seen as buying improved led by continued DIIs & FIIs inflows.

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