SGX Nifty indicates gap-down opening for domestic markets

Domestic stock markets likely to see a weak opening amid mixed clues. According to analysts, market is likely to remain volatile but move within a broad range.

The key indices are likely to track their global peers in the short-term. The experts, however, point out that fundamentals of Indian economy are strong and, thus, its a buy-on-dip market.

Hemant Kanawala, Senior Executive Vice President & Head–Equity, Kotak Mahindra Life Insurance Company Limited said, “Amid the global discussion on growth-inflation trade off, Indian economy continues to be in a relatively strong position, especially among the emerging market (EM) Basket."

SGX Nifty at 17,505 indicates that the market may open about 60 points lower, as Nifty futures on Friday closed at 17,562.750,

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"Policy stability, visibility of growth and correction in commodity prices have led to a turnaround in the FII sentiments, with FIIs turning net buyers since July-22 at $7 billion against $33 billion worth of net outflows seen between October 2021 and June 2022," Kanawala said.

"Given strength in domestic economy, we remain positive on equities from a long-term point of view,” he added.

Mixed economy numbers

India's key economic indicators continue to keep traders on the edge. While GDP numbers was below-than-expected, GST collections, auto sales and credit offtake remained robust.

India's real GDP or Gross Domestic Product (GDP) at constant (2011-12) prices in Q1 FY23 grew 13.5 per cent, as per the data released by the National Statistical Office (NSO), Ministry of Statistics and Programme Implementation.

Economists, however, point out that the steep growth is primarily on account of base effect.

"While the double-digit annualised growth is impressive prima facie, the actual print is around two per cent lower than market expectations and is also accompanied by weak sequential momentum," said Acuité.

"The sequential momentum appears soft with GDP contracting by 9.6 per cent QoQ, worse than the pre-pandemic seasonal average (over a 10-year period) of -4.6 per cent observed in Q1," it warned.

August GST collections, auto sales, July credit offtake, July core sector data, and August manufacturing PMI data all indicated that domestic economic activity continues to remain resilient amid global headwinds, said IFA Global in a note.

Meanwhile, Asian stocks are mixed. While Japan, Hong Kong and China stocks are down, equities across Korea, Taiwan and Australia eke out marginal gains.

Stretched valuations

According to Shibani Sircar Kurian, Senior EVP & Head—Equity Research, Kotak Mutual Fund, “Valuations of Indian equity markets have re-rated recently and Indian markets are currently trading at a premium to historical valuations on a relative basis to other emerging markets.”

“While this may lead to some near-term consolidation in markets, we remain constructive over the medium-term with growth outlook in India appearing to be relatively stronger than most other economies,” he added.

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