India is currently one of the most alluring emerging markets for investment. Our country has shown significant developments in terms of key macro-parameters. The rebound in GDP for FY22 has been remarkable, making it one of the fastest-growing countries globally. The Indian economy made a rapid stride in FY22 by climbing 8.7% YoY — the highest in a decade! Going forward, an increase in private consumption is likely to boost GDP.

As per data issued by the Department of Economic Affairs, the capital expenditure of India Inc. during April-August 2022 is 46.8% higher than the same period of the previous year. The growth engine was fuelled by roads, railroads, and defence accounting for the majority of these expenditures.

Soaring inflation has also been the buzz of the town, which fortunately in India, does not seem as ugly. The gap between the Wholesale Price Index and Consumer Price Index has narrowed. The impact of declining wholesale inflation is expected to reflect on retail inflation with a lag in the coming months.

Moreover, Inflation in our country is better controlled than that of the world at large. To illustrate, retail inflation for India over Apr-Sept’22 stood at 7.2%. It was lower than the median inflation of major economies, which measures inflation globally at 8%.

Crude oil prices have recently fallen substantially from their peak which will help to reduce the current fiscal deficit. The easing commodity prices bode well for the nation as it will help to lower inflation and assist corporations to reduce their input costs, thereby improving their margins and earnings profitability. Further, the supply side challenges are gradually resolving and the worst seems to be behind for the India Inc. margins trajectory.

Even on fundamental grounds, our economy has multiple tailwinds. To start with, one of the early indicators of the country’s health is its bank credit growth. RBI’s recent data revealed that the bank credit sectoral deployment figures suggest a YoY increase across all verticals. For the past five consecutive months, the non-food credit growth has been growing in double digits.

India is in a better position now given the underlying stellar corporate earnings momentum, the cleansed balance sheets & the improving asset quality of the banks. Additionally, there are levers in place for capex cycle revival, credit off-take, and the likelihood of a manufacturing resurgence due to PLI and other government reforms.

Domestic-oriented themes are now dominating market dynamics. For instance, a recovery in auto sales, an uptick in consumer goods, a strong rebound in the hotels & tourism industry, and robust momentum in the housing market point towards a brighter side. This coupled with increasing DII participation and the expected comeback of FIIs inflows has the potential to drive the markets to new heights once prevailing clouds of global uncertainty disappear.

From a long-term perspective, the structural large bull cycle in India remains intact. Investors must therefore continue to remain invested in financially resilient and quality stocks.

Technical Outlook:

The benchmark index couldn’t hold on to its opening gains on a couple of occasions in this truncated week and traded within the range of 17650 to 17800 levels for the week.

On the daily chart, Nifty50 has formed a spinning top candlestick pattern. A spinning top is a candlestick pattern that has a short real body that’s vertically centered between long upper and lower shadows which normally indicates volatility and indecision among the traders.

The technical structure on the broader time frames still looks impressive and any dip toward the support level should be utilized as a buying opportunity.

The 21 EMA which is placed at 17470 may act as a support for the index. The immediate resistance for the index is near 17935 – 18100 levels where the call writers have been active. Nifty50 closed the week at 17786.80, up 1.20%.

Expectations of the Week:

The main headliner globally would be the FOMC meeting and press conference. As the Fed has aggressively hiked interest rates this year, market participants would be interested to know whether the pace now slows down. Meanwhile, investors would also closely monitor the US Initial Jobless Claims, Unemployment rate, and ISM Non-Manufacturing PMI that are slated to release next week. Back home, the monthly auto sales numbers are bound to pique the interest of investors attempting to forecast future trends in auto stocks.