by Mr. Jaykrishna Gandhi, Head – Business Development, Institutional Equities, Emkay Global Financial Services

‘’US Equities remain range bound during the week – with blips of volatility around tariffs and soft earnings. US Markets await CPI data to be released later tonight. January job’s data (NFP report) was strong yet again, adding 143k – this now leaves the 3-mth average at 237k (strong). The tariff saga continues – with TRUMP announcing 25% tariffs on aluminium and Steel early this week. While, the market is getting fatigued of this recurring news flow, the uncertainty would continue to prevail and may keep the market volatility high. For impact on Indian markets, we opine – a relative benefit to Indian exports to the US, should be negated by China’s reaction (likely price cuts) and another round of DXY appreciation – which would hurt equities and the currency

INDIA equities had a rough week, extending its time correction – SMID indices were hardest hit, with both MID/Small cap indices losing around 6%. The sentiment has completely gone sour. But, on valuation front, both SMID indices are now below the LT average band. Not much to take out of the Earnings this week – but, Autos gave good numbers – M&M outlined very strong outlook for tractors; Hero maintained double digit growth outlook with company scaling back some of the lost market share. Consumer names continue to see volume growth and margin pressures. In the MSCI Feb review – we saw inclusion of Hyundai and deletion of Adani Green from the Global standard Index.

Lot of action on the liquidity front this week – while a conventional 25bps rate cut was largely priced-in, there was some market disappointment on lack of further liquidity measures during the MPC meet. On further liquidity measures, we expect RBI would have to do additional OMOs amounting to INR 400bn, followed by more VRRs and FX swaps to tackle the liquidity deficit that is likely to turn ugly again by March end. This liquidity infusion and would be incrementally positive for the Banks, especially the ones starving for liquidity – HDFCB, IIB likely to get further leg up here

We hold Nifty Dec -25 target of 25000. For sector positioning – we retain our tilt toward consumption and add our weights on Consumer Discretionary (CD), which is our preferred route to play the consumption theme. Incremental growth is sharpest for these sectors and valuations are still reasonable.