Topic 1: BULL RIDES ON POSITIVE CUES

With markets rallying through June 2023, it touched all-time highs thrice in a month. As on 1st June 23 Nifty 50 opened at 18579 by the end of the month it crossed the 19300 mark. Sensex too opened at 62736 points and ended at 64386 by the end of June 23. The major factor which has fuelled the markets are the strong inflows from Foreign Institutional investors (FIIs). The mix of several factors has attracted them, firstly the current account deficit of March 23 quarter at about 0.2% of GDP, which is much lower than estimates of 4% of GDP.

Secondly the US GDP stands at much higher than expected for first quarter at 2%, which is 70 bps over second estimate, which indicates the recession fears are being denied largely. Thirdly the merger of HDFC Ltd. and HDFC Bank created excitement in the Indian BFSI sector as well as buying in possible index inclusions. The last and most important factor is the stable rupee and positive real interest rates which uplifts FPIs inflows into equity and debt too.

The robust corporate earnings results have helped markets in the June quarter, the sectors which gained remarkably are banks, non-banking lenders, oil & producers and FMCG. Also, the favourable inflation numbers aided the markets to gain, India's consumer price index (CPI) inflation fell to 4.25% in May hitting a 25-month low. This was a significant drop in retail inflation as it was 4.7% in April 2023 and 7.04% in May 2022. The upper tolerance limit of 6% by Reserve Bank of India for three consecutive months. With the advancement of monsoon across.India and also the IMD prediction for normal monsoon for this year, which assure the low food inflation and good economic numbers which would affect few sectors like banking, auto, FMCG and agro based sectors in coming months .

The international factors would be uncertain for the markets with the ambiguity over US economy and other world economies struggling to curb the inflation. The Ukraine war is still on which is being closely monitored by the world. The global markets have also ended in the positive. In the last week of June, strong economic data releases in the US showed that the economy is resilient, while the inflation is cooling. The ease in inflation data in Europe and the stimulus hope from Beijing to boost the Chinese economy also weighed on the market sentiments. Also, the US fed indicates two more rate hikes in the current year are expected.

The oil price is expected to surge with Saudi Arabia’s cut production by 1 million barrel per day starting from July 2. OPEC decided to reduce overall production targets from 2024 by further total of 1.4 million bpd. The US rate hikes also affects the global crude prices, as the strong dollar makes oil costlier for other currency holders. Indian stock markets are expected to move in positive territory on the back of good monsoon, continuous positive economic numbers, commendable corporate results, FIIs inflows, increasing DIIs (domestic institutional investors) and vigilant watch by regulators on the economic conditions of the country.



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