The domestic markets are expected open on a flat to negative note on Wednesday. According to experts, lack of a trigger and profit-booking will keep the market under pressure. As FPIs have slowed down their investments, the market could come under pressure in the short-term.
As most of the prominent companies have already reported Q1 results for FY24, the focus is on the RBI rate policy. The central bank is also expected to maintain the status-quo.
GST collections up
The Asian markets are trading in a mild;y red zone amid mixed cues from global markets. Fitch has downgraded the US’ long-term ratings, citing “expected fiscal deterioration over the next three years”.
Amidst weak cues, the Gift Nifty is hovering around 19,750, signalling a gap-down opening of about 75 points.
Though GST collections at Rs 1.65 lakh crore indicate strong underlying economic numbers, sales figures reported by automobile companies for July are mixed, said analysts.
According to Deepak Jasani, Head of Research, HDFC Securities, “At Rs 1.65 lakh crore, GST collections in July are the third-highest of all time, and 2.2 per cent higher than that collected in June. This is the fifth month in a row that monthly GST collections have come in above the Rs 1.5-lakh-crore mark.
Manufacturing data
India’s manufacturing activity maintained its growth momentum in July as order growth remained elevated amid buoyant demand. The India Manufacturing Purchasing Managers’ Index came in at 57.7 in July, compared to 57.8 in June, according to IHS Markit.
Aditi Nayar, Chief Economist, Head - Research and Outreach, ICRA Ltd, said “There is a clear divergence between revenues on collections on account of domestic transactions (including imports of services) and that on account of imported goods, with the latter averaging just 0.8 per cent YoY during April-July 2023, reflecting the compression in merchandise imports. This divergence is set to continue owing to the expectation of a contraction in merchandise imports in FY2024.
Auto sales figures
Saji John, Research analyst at Geojit Financial Services, said: “As expected, Maruti and M&M have posted strong double-digit growth, with UV continuing to drive sales. Tata Motors has been under pressure for some time due to pre-buying in CV and supply constraints. On the other hand, we anticipate muted sales in the 2W segment. Over the past six months, the auto sector’s performance has bettered the broader market, primarily due to the expected rural revival and the advantage of lower input costs.”
Current valuations are not in a favourable zone, he said, adding “we believe that companies possessing a robust product pipeline or a healthy order backlog are likely to outshine the market in the upcoming quarters.”
Analysts expect the consolidation phase to continue. “Overall, we expect the market to consolidate in a range with a positive bias as we move further into the earnings season. The BoE’s interest rate decision, along with a slew of economic data points, including US Manufacturing PMI and monthly Non-Farm Payrolls data during the week, would provide direction to the markets,” said Siddhartha Khama of Motilal Oswal Financial.