US inflation to Fed rates: Here are key factors that may dictate stock markets in near term

Following weak global cues after strong US economic data, Indian stocks snapped its three days winning streak on Friday in the week gone by. US bond yield and US dollar, both scaled higher making the equities and gold less attractive for investors.

Siddarth Bhamre, Head of Research at Religare Broking talks to Mint and shares view on various factors that may dictate Dalal Street and other global markets in near term:

RBI has cleared the deck for big companies like CAMS to launch online payment. How difficult will the situation get for Paytm and others?.

There are already around 80 payment aggregators, however it’s just 3 players who have more than 90% of current market share. With the payments market growing at a rapid pace, we believe CAMSPay would make its presence felt without disrupting the market. This market can easily accommodate one more player without damaging numbers of other 3 for now.

Air India has made quite a statement with a big ticket deal. How do you see that changing the sector metrics. What should investors of listed aviation cos like Indigo, SpiceJet do?.

This historic order has created a buzz worldwide. This development only emphasizes that there is still huge growth potential in this sector. If we look at the cost of flying to income ratio, it has drastically fallen over the last decade. Traveling in a plane is no more a luxury. With income in India growing, both business and leisure travel is going to witness high growth. Needless to mention, other players will benefit too, as this industry worldwide is multiplayer. However only those airlines will benefit who will optimally utilize their resources to give value for money traveling experiences.

What will be the factors that will drive the market in the coming days?.

The single biggest factor for all markets these days is US inflation data along with US job data leading to varied market expectations on change in interest rate by FED. With bond yields moving higher making equity less attractive, globally markets are in a range with negative bias.

A decline in inflation without much increase in jobless data should set a good base for the market to move out of this range. Every other aspect like Dollar Index, Crude, etc are dependent on the above for now.

IT and tech stocks have rallied in recent sessions. Any NASDAQ connect that you would like to highlight.

Well there is a rub-off effect on our IT stocks whenever there are big moves in NASDAQ. Having said that, with earnings visibility, and cost pressure coming down along with attrition, this space has attracted buying interest. We are optimistic here in selected names.

Banking stocks have not participated in the recent mkt rally. Is interest rates peaking out the reason for this.

Well, it will be premature to say that interest rates are peaking out as it’s not just a function of our inflation but also what’s happening with interest rates in US markets. Banking sector and stocks have done well when HDFC Bank was underperforming. Now we are witnessing the reverse of it, which we believe is healthy. Also a rising interest rate scenario in a moderate to high growth environment, which we believe we are in, is a positive scenario for banks. So we won’t read much on recent underperformance.

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