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Informist, Tuesday, Aug 6, 2024

By Anjana Therese Antony

MUMBAI – Losses in the domestic equity market may continue on Wednesday on account of worries about a likely recession in the US, tensions in West Asia, unrest in Bangladesh, and unwinding of the yen carry trades, analysts said. "In the near term, we expect the market to consolidate and remain under pressure until the global volatility subsidies," Siddhartha Khemka, head - retail research at Motilal Oswal Financial Services, said in a post-market note today. 

There are also worries that the global tensions would affect Indian companies' earnings in the medium term. "The sharper-than-expected weakness in US labour markets, a prolonged slowdown in China, and recession worries in Japan increase the risks to consensus earnings estimates for FY2025," Kotak Institutional Equities said in its strategy report today. 

Though the Japanese yen depreciated today after five days of appreciation, analysts believe there is still room for the currency to appreciate again compared to the dollar. This is because the Bank of Japan is expected to increase interest rates further going forward, analysts said. "...borrowing in other currencies and investing in liquid Japanese assets may become more profitable. Thus, demand for yen is likely to rise relative to other currencies, prompting it to strengthen," Vinay Paharia, chief investment officer at PGIM India Asset Management said in a report. 

Back home, the Reserve Bank of India's Monetary Policy Committee meeting outcome on Thursday is widely awaited to get clues on interest rate trajectory. Though Governor Shaktikanta Das had reiterated multiple times that the central bank will not look at interest rate decisions in the US, but primarily on domestic inflation data, to consider cutting rates, investors would look at whether the current global woes would impact the RBI's decision going forward. The rate-setting panel is widely expected to retain the interest rate at 6.50%. 

"By holding the rate steady, the RBI aims to mitigate inflation without stifling economic momentum. Rising food prices have been a significant contributor to inflation, prompting the central bank to adopt a wait-and-watch strategy," Suman Bannerjee, chief investment officer at Hedonova, said in a note today. 

Today, the benchmark indices closed lower for the third straight session, dragged down by global worries. The Nifty 50 closed 0.3% lower at 23992.55 points and the BSE Sensex ended 0.2% down at 78593.07 points. The near-term support for the Nifty 50 index is pegged at 23900-23800 points and resistance at 24300-24500 points, according to three technical and derivatives analysts at different broking firms. 

Meanwhile, fear gauge India VIX fell today after rising a whopping 40% in the previous session. The volatility index ended 8% lower at 18.7245.

On the earnings front, Godrej Consumer Products, Pidilite Industries, Apollo Tyres, and Dr Lal Pathlabs are some of the companies which are scheduled to release their results for the June quarter on Wednesday. 

Further, the board of AIA Engineering will meet on Wednesday to consider a buyback of shares of the company. If approved, this will be the first share buyback by the company.  End

Edited by Aditya Sakorkar

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