•    The domestic equity markets experienced profit booking and caution selling amid concerns over high valuations and froth in some segments of the market. The weak global cues and hotter than expected inflation numbers from US, further hurt sentiments. As a result, the Nifty 50 benchmark index closed (-) 2.1% down. The Nifty Midcap 150 index and Nifty Small cap 250 index registered losses of (-) 4.1% and (-) 5.9% respectively.

•    Barring Nifty IT, all other sectoral indices closed in red, this week. Nifty IT gained 1.1% while Nifty FMCG and Nifty Financial Services fell the least registering a fall of (-) 0.5% and (-) 1.7% respectively. The sectoral indices which fell the most were Nifty Realty, Nifty PSU Banks and Nifty Media losing (-) 9.4%, (-) 7.9% and (-) 8.3% respectively.

•    US CPI came at 3.8%- eroding expectations of a June Fed rate cut. UK equity markets saw a gains at the beginning of the week due to good performance in telecom stocks. However reacting to global cues, FTSE ended the week flat gaining 1.0%. Asian markets were a mixed bag with Hang Seng and Shanghai gaining 2.01% and 0.3% while Nikkei 225 and Kospi lost (-) 0.4% and (-) 0.1%.

•     The FPI flows were extremely robust at $3.48 Billion during the week. Over the last 4 weeks, the FPIs have infused nearly $5.55 Billion into Indian equities. While debt flows continued to be robust, the week also marked the shift of FPI flows from the debt side to the equity side. However, the markets corrected sharply despite the FPI flow factor.

•    The big trigger for the fall in the markets was the sharp spike in US bond yields. During the week, the US bond yields closed at 4.308 with the spike largely led by fears of delayed rate cuts and a sell-off in the bond markets in the US. The higher bond markets are negative for Indian markets as it normally triggers higher bond yields in India and also threatens to make cost of funds higher.

•    During the week, global rating agency, Moody’s Investor Services, upgraded the GDP growth estimate in India for FY24 to 8%. This is sharply higher than the MOSPI projection of 7.6% growth and the RBI growth projection of just about 7%. The upgrade did trigger a surge in FPI flows, but the selling was so intense that it really did not matter. However, the Moody’s upgrade is likely to trigger a slew of other upgrades by brokers.

•    Crude oil was the other big poser in the week with crude prices spiking to $85.50/bbl with the IEA and the OPEC virtually confirming that the oil market would remain undersupplied. It only means that oil prices could now get closer to $90/bbl, a level at which Indian policy makers do tend to get slightly jittery. For India, oil poses a unique problem, as India relies on imported crude for nearly 80% of its daily crude oil requirements. That is a risk to oil imports costs and also for imported inflation.

Best Regards,

Alpha Research Team

Disclaimer

The above views are our expectations of the economy, market and investments. The views may or may not play out accordingly. You are requested to do your own due diligence before making any investment.