The Wrap🌯 28 Jan 2024 | Correction Continues
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Correction Continues, FII Selling crosses 35Kcr for Jan, Market enter the most sensitive week
Another week and another fall.
Nifty and broader indices continue to correct at various paces.
Media and Realty index were the worst performers for the week while public sector enterprises continue to gain momentum. Everything else is consolidating, which is really healthy at this junction of the market.
Market breadth continues to cool off from a high of 95, two weeks ago, to 85 today. I expect this trend to further continue for next week as we enter what may possibly be the most sensitive week of this month.
Two big events take place in the coming week, back to back.
On Jan 31st, post our market close we will hear about latest decision by US Fed on interest rates. I expect some harsh commentary by the Fed as markets have run up much faster and further on hopes of accelerated rate cuts.
The good news is markets are not wrong.
PCE Inflation (Jerome Powell’s favorite metric to gauge inflation trajectory) is now below its target of 2%. US economy on the other hand also grew by 2.5% in 2023 - this in an year where most of the market was preparing for a recession.
This growth along with declining inflation has led to the emergence of a new economic term - the Teflon economy.
Like Teflon, US economy has been able to repel all sorts of economic troubles and some how managed to steer itself into a safe zone.
The second most important event of the year, and maybe more relevant to Indian market is - the interim budget on Feb 1st.
I am not going to waste your time with irrelevant pre budget commentary. In our next week’s issue we will discuss the budget in detail. Do watch out for sectors like renewable (solar, wind, hydrogen, gas, batteries) and defence, which are widely expected to receive major allocations. Other key sectors to look out for are electronics manufacturing and low end semi conductor manufacturing.
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