Indian markets opened 0.8 percent higher ahead of key macroeconomic data due later on Monday. Both the Sensex and Nifty rose for the third consecutive session. The recent monthly data on purchase managers’ index (PMI), goods and services tax (GST) and direct tax numbers, and automobile sales were better than expected. This, along with continued buying by foreign investors, has improved sentiments among investors.
“The RBI (Reserve Bank of India) is likely to opt for a slower pace of hikes in forthcoming meetings. The country’s retail inflation is likely to moderate after hitting a peak recently. We expect a strong economic rebound, normalised commodity prices, inflation within the targeted range and better visibility in the near term,” said Mitul Shah, head of research at Reliance Securities.
Market Live Updates: Sensex up 350 pts; Nifty around 17,950; IT, realty stocks lead rally
Factors behind the rise
Macroeconomic data: The government will reveal the Index of Industrial Production and Consumer Price Inflation data after 5.30 pm on Monday. India’s headline retail inflation rate likely rose for the first time in four months to 6.9 percent in August, according to a Moneycontrol poll of 19 economists. Industrial growth is seen tumbling to 4.1 percent in July from 12.3 percent in June, according to the median of estimates by 17 economists polled by Moneycontrol.
Falling crude: A steady drop in the price of crude oil raises optimism of an improvement on the fiscal deficit front and softer consumer prices. Brent crude has fallen over 13 percent since the start of September. So far this year it is still up 18 percent.
PMI data: India’s manufacturing PMI remained robust in August, coming in at 56.2, broadly similar to the 56.4 seen in July. Stronger domestic orders and a pickup in export demand underpinned the resilience. “India’s manufacturing PMI continued to show underlying strength in August, even as other growth indicators showed a loss of momentum. The weakening global growth outlook and tighter domestic financial conditions remain key downside risks to the recovery,” said Rahul Bajoria, MD and chief India economist, Barclays.
GST and direct tax: GST collections reported a healthy trend, rising for the second month in a row, with the 28 percent year-on-year rise a function of the economic recovery, better compliance as well as elevated inflation. With the headline GST collection in July 2022 exceeding the monthly average forecast of Rs 1.45 lakh crore for this year, Icra foresees an upside of Rs 1.15 lakh crore relative to the FY2023 BE for CGST collections. Provisional gross direct tax collections for FY23 till September 8 stood at Rs 6.48 lakh crore, which is 35.5 percent higher than over the same period last year.
Monthly auto sales data: The monthly data for auto sectors in August was robust. With Covid risks fading and the onset of the festival season, analysts expect demand will likely stay strong and believe the industry is well poised to grow in the coming quarters. “Rising interest rates would also not be a speed-breaker to the growth, as it might not materially impact the purchasing decision. We also believe margin pressure seems to be bottoming out in H1FY23, given most of key RM (raw materials) —steel, aluminium—prices are down >40% from recent highs while that of crude is down ~25% from recent highs. Thus, lower RM cost coupled with price hike and better operating leverage will significantly lift the profitability from H2FY23 onwards,” Aditya Birla Capital said in a recent note.
“Apart from the strong underlying domestic demand, the inventory ramp-up at dealerships ahead of the festive season supported the volume. A robust order book, low channel inventory, new product launches, better chip availability remain positives for the PV (passenger vehicle) space. EV (electric vehicle) sales are also gaining traction, with volume of E-2W and E-PV growing at a nonlinear pace,” the report added.
Foreign institutional investors (FIIs): Strong buying by foreign investors has buoyed Indian equities, even as markets are falling globally. Since the start of August, FIIs have bought around $6.76 billion of Indian shares. Analysts expect this trend to continue ahead of the festive season.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
