Markets May Remain In Recovery Mode For Some More Time
In the wake of defensive buying in safe haven sectors such as debt, commodities, etc., Indian stock markets somehow got neglected by the market participants during last week. Persistent rise in the global oil prices has led to pessimism in the markets. Despite the daily ambiguity between OPEC and the US, oil prices have remained more or less stable after hitting almost a yearly high of USD 64.5 per barrel. There was an abrupt surge of 9.62 million barrels on a single day in the US crude oil production, but this was offset by the uninterrupted production cut by OPEC which would persist till the end of November 2017. Crude is expected to hit USD 70 or even USD 100 per barrel in the medium term.
All-in-all, Indian markets saw a sell-off in oil-dependent sectors such as oil marketing companies, airlines, metals, among others. However, fresh buying was witnessed in stocks of many other sectors, which maintained a rise in the net equity investments of Rs 50,331.69 crore and Rs 74,892.63 crore of the gross buying during 2017 by the FIIs and DIIs, respectively. On the global front too, major world indices are off their all-time highs, with the US hitting two-month low amid fall in bond yields and equity valuation worries. On the other hand, gold has been glittering since the rise in crude oil prices and also ahead of the US consumer data. The US CPI rose 0.1%, but excluding food and energy, it has risen 0.2%, while retail sales too unexpectedly rose 0.2%. Both CPI and retails sales data have cued a rate hike next month.
Even on the domestic front, the country’s wholesale price index (WPI) rose to a six-month high of 3.59% in October, as against 2.6% rise last month and 1.27% in the same month of the previous year. The rise in vegetable prices, specifically onions and raging oil prices led to a spike in the WPI. The CPI too accelerated to its 7-month high at 3.58%, as against 3.28% in September.
Going forward, on a provisional basis, markets have witnessed some short covering in the recent session after the fall for three consecutive three day and are likely to remain in the recovery zone for some more time. The GST Council's decision to cut down rates of more than 200 items in the 28% GST rate bracket to 18% is a clear boost to the businesses which have been struggling so far to cope up with the GST roll-out. This could be a big positive for the government ahead of the Gujarat elections.
Moreover, the last leg of September earnings season is still left with over 100 companies which are yet to declare their earnings. The earnings reports of these companies are expected to drive the markets in the coming sessions.
To sum up, markets are lacking positive triggers for now, but are likely to see some more recovery going forward. However, investors would hesitate to go for fresh buying at these levels, unless there is a confirmation of a prominent upside. Investors can grab a good opportunity of buying on dips, while traders are suggested to remain watchful while picking up a stock for expected momentum.
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