Weekly market wrap: Global recession fears push Sensex 721 points down; what’s next?

Domestic equity markets snapped their three-week gaining streak as global recession worries and the falling rupee dampened the mood. The benchmark BSE Sensex closed 721.06 points, or 1.32 per cent, down at 53,760.78 on July 15, 2022, against 54,481.84 on July 8, 2022. Likewise, the 50-share NSE Nifty index settled 171.40 points, or 1.06 per cent, lower at 16,049.20.

Meanwhile, IT majors HCL Technologies (down 10.21 per cent) and Tata Consultancy Services (down 8.29 per cent) emerged as top losers in the Nifty50 index. Bharti Airtel, Wipro, Infosys and Tech Mahindra also lost between 5 per cent and 7 per cent. On the other hand, NTPC, Oil & Natural Gas Corporation, Tata Consumer Products, Maruti Suzuki, Eicher Motors, Mahindra & Mahindra, Asian Paints, Cipla and Dr Reddy’s Laboratories gained over 3 per cent.

Market watchers believe that equity markets ended in red on fears that central bank moves to fight inflation would spark a recession.

Apurva Sheth, head of market perspectives, Samco Securities said, “As concerns of growing inflation and recession hang over the global economy, Indian benchmark indices are projected to remain uncertain in the near term. In this context, investors are anticipated to keep a close watch on the currency market, as the USD/INR has reached new all-time lows. Further, with the earnings season in full swing, market players should avoid reading too much into India Inc’s numbers and instead focus on the management commentary.”

Joseph Thomas, head of research, Emkay Wealth Management said, “There have been some signs of improvement in the overall macro environment mainly due to the surge in the US dollar and the consequent fall in commodity prices, especially Brent. But currency depreciation might eat into some of the gains made in prices after the fall, as the trade deficit moves close to $196 billion. The US inflation number surged past the 9 per cent level and was much higher than general expectations, and this fuelled the speculation on the quantum of the next rate hike by the Fed. The market will be looking forward to the FOMC meeting as also other related developments to gauge the direction better.”

Sectorwise, the BSE TECk and IT indices retreated 5.87 per cent and 5.82 per cent, respectively, during the past five trading sessions. On the other hand, the BSE Power, Oil & Gas and Auto advanced between 2 per cent and 5 per cent.

Foreign investors continued to put pressure on the Indian equity market as they pulled out over Rs 7,000 crore worth of shares this month so far amid steady appreciation of the dollar and rising interest rates in the US.

In the forthcoming week, investors would first react to the results of HDFC Bank and ICICI Prudential Life Insurance Company which are scheduled to announce on July 16. Nelco, Ambuja Cements, AU Small Finance Bank, HDFC Life Insurance Company, Hindustan Unilever, ICICI Lombard General Insurance Company, JSW Energy, L&T Finance Holdings, CEAT, Indusind Bank, Wipro, Crisil, Cyient, PVR, HDFC AMC, JSW Steel, Ultratech Cement among others will announce their results during the week.

The Monsoon Session of the Parliament, which will begin on July 18, 2022, and will go on till August 12, 2022, will also grab the trader’s attention. Apart from important Bills and discussions, this session holds a lot of importance given the fact that both the election of the President of India and the Vice President of India will take place during the session.

On the economic front, traders will be eyeing the consumer price index data scheduled to be announced on July 20. Traders will also keep an eye on the foreign exchange reserves which are scheduled to be released on July 22. Foreign exchange reserves in India decreased to $588.31 billion on July 1 from $593.32 billion in the previous week.

Commenting on the further movement of markets, Shrikant Chouhan, head of equity research (retail), Kotak Securities said, “Markets will continue to react to global macro factors like inflation, interest rate measures, currency and commodity movement. With the start of April-June 2022 quarter result season, we can expect stock and sector-specific action over the next one month.”