Synopsis
Concerns over rising inflation may keep a lid on gains, with data released post market hours on Friday showing that retail inflation, measured by the Consumer Price Index, rose to 4.48% in October. Industrial production growth slipped to 3.1% in September mainly due to the waning base effect. Markets will be closed on Friday on account of Guru Nanak Jayanti.
Mumbai: With the result and festival season largely behind us, the market’s focus in this holiday truncated week will shift to global cues for further direction.
Concerns over rising inflation may keep a lid on gains, with data released post market hours on Friday showing that retail inflation, measured by the Consumer Price Index, rose to 4.48% in October. Industrial production growth slipped to 3.1% in September mainly due to the waning base effect. Markets will be closed on Friday on on account of Guru Nanak Jayanti.
“What’s going to be driving the markets are many data points. Global inflation is also going to matter as the US has also seen a high number and they have already announced the tapering. On interest rates, one thing is clear that we are heading upwards,” said Vinit Sambre, head of equities at DSP Investment Managers. Sambre said many companies that have shown results have seen impact on profitability due to higher input prices.
“Triggers for the market to go higher are waning as the market is pricing in a large part of strong recovery going forward. Valuation doesn’t give enough comfort when macro is not in favour,” said Sambre.
At 22.0 times, Nifty’s 12-month forward price to earnings is now at 41% premium to its 16-year average.
India’s benchmark indices rose 1% last week thanks to a rebound in the later part of the week. The Sensex and Nifty gained over 1% on Friday after three straight days of losses on the back of surge in inflation rate in the US to a three-decade high.
Some expect the stock market to tide over these inflation concerns and head higher.
“Markets are likely to pick up as they have maintained certain levels. I expect the Nifty to touch 18,400 in the next few weeks as global markets are doing well,” said Piyush Garg, CIO, ICICI Securities.
Technical analysts said if the Nifty sustains above 18,000, it may head higher to 18,300-18,400. “If the Nifty moves above the 18,200-18,300 zone, then the intermediate downtrend is over,” said Siddarth Bhamre, director-alternative investments and research at InCred Equities.
