Markets may remain positive amid earnings, economic data coming in

This week, the markets will remain busy with the earnings season picking up pace and the United States Federal Reserve’s rate decision due on Wednesday. In addition, several economic data will be released. Majority of global markets, including India, will remain closed on Wednesday on account of Labour Day.

Prominent companies like Titan, Ultratech, Coal India, Dabur and Kotak Bank, will announce their results this week. Investors will also react to the results of ICICI Bank, IDFC First Bank, RBL Bank, and Yes Bank which were declared over the weekend.

Thus global headlines and domestic earnings season will grab investors’ attention, which may result in several stock-specific actions along with sectoral rotation while the overall trend of the market is expected to remain positive. The auto sector will also be in focus during the week as carmakers will come out with their monthly sales number.

On the economic calendar front, apart from the Fed’s policy statement, the US will be releasing consumer confidence, non-farm payroll, and unemployment data. Europe will announce consumer confidence, inflation, and GDP data, while, on the domestic front, India’s infrastructure and manufacturing data will be important to watch out for.

Markets last week strengthened on the back of healthy domestic macro data and in-line Q4 results. Further, a sharp decline in India’s VIX amid reducing geopolitical tension indicates lower market volatility in the near term. Nifty gained 273 points (+1.2%) to close at 22,420 levels. Broader market outperformed with Midcap100 and Smallcap100 up 2.7% and 1.4% respectively.

All the sectors ended in green with PSU Banks being top gainer up 6.4% followed by Realty up 4.6% on the back of healthy quarterly results. Metal stocks witnessed fresh buying amid a rise in commodity prices, improving Chinese economy, and the expectation of healthy demand ahead.

Phase two of the general election is in full swing with polling underway in 88 parliamentary constituencies. On the economic front, India’s Composite PMI surged to 62.2 in April, indicating that the country is positioned to maintain its status as the fastest-growing major economy this year. Q4 Earnings season so far has seen a decent beginning with most of the companies meeting market expectations.

Global markets however were subdued as mixed cues kept investors cautious. On the positive side, easing of geo-political tension in the Middle East and healthy results from some of the large giants cheered markets, while slower than expected US GDP data and manufacturing data kept investors nervous.

China left benchmark lending rates unchanged at a monthly fixing on Monday, in line with market expectations. The Bank of Japan left its short-term interest rate target at 0-0.1% and projected inflation to stay around 2% over the next three years. But a lack of clear guidance on the future rate hike path triggered a broad-based decline in the yen, pushing it down to a fresh 34-year low and keeping markets on edge over the chance of currency intervention.

(The author is head of Retail Research, Motilal Oswal Financial
Services Ltd)