Pre-market report. SGX indicates a gap-up opening for Nifty

Indian stock markets are likely to see a gap-up opening on Monday. This week being the curtailed one, (markets are closed on Tuesday for Gurunanak Jayanthi), analysts expect volume to remain low.

SGX Nifty at 18,301 indicates another 100 points gain for Nifty at open as Nifty futures on Friday closed at 18,194. Equity market across Asia-Pacific region are ruling firm in early deals on Monday.

Healthy FPI flow

With foreign portfolio investors reposing faith on the Indian equities, analysts expect markets to remain in a consolidation mode. In the first week of November, FPIs infused ₹15,280 crore, betting on domestic activity and on hopes that the US Federal Reserve would go soft on rate hikes.

FPIs were net sellers in October as they were in September, said K Dileep, Head of PMS at Geojit Financial Services. But, in November, they started with a good note and they were net buyers , he said adding “Expect decent flow going forward as the growth story of India is intact. Better than expected earnings and comfortable macro numbers are positive for India compared to other emerging markets. I don’t expect any drastic move in the market on either side for another couple of quarters. But it is an ideal time for those who are looking at the medium to long term.”

Q3 earnings eyed

Focus will also be on quarterly earnings, experts said.

According to Motilal Oswal Financial, the Q2-FY23 corporate earnings have been in-line thus far with heavyweights, such as Reliance Industries, HDFC Bank, TCS, ICICI Bank, and Infosys, registering in-line aggregate performance. The spread of earnings has been decent with 70 per cent of our universe either meeting or exceeding profit expectations.

However, the growth is being led by just BFSI and Autos with Metals, Oil & Gas and Cement posting a YoY earnings decline, it said adding “As the benefit of the recent moderation in commodity costs start accruing in 2HFY23, we expect other sectors to contribute too.”

Markets have bounced back smartly in Oct’22. Nifty now trades at 22x FY23, comfortably above the LPA and offers limited upside in the near term, said Motilal Oswal in its Bulls & Bears monthly strategy report.

“We reckon the upside from here will be a function of stability in global and local macros and continued earnings delivery v/s expectations,” it added.

Headwinds

Amid buoyant mood, there are some words of cautions too from analysts.

Worries about China’s growth amid its zero-Covid policy, and global monetary policy tightening to stave off inflation exacerbated by the Russia-Ukraine war, have roiled markets this year, leaving little room for sustained risk appetite, said Deepak Jasani, Head of Retail Research, HDFC Securities.

Also, one has to keep it in mind the unemployment rate in India that rose to 7.77 per cent in October compared to a four-year low of 6.43 per cent in September, data from Centre for Monitoring Indian Economy (CMIE) show, he said.