US election, Q2 results may keep mkts volatile: Analysts

The markets have been volatile since the past few sessions and could not hold on to higher levels, and if experts are to be believed, they would remain so for the next few weeks.

At the global level, the upcoming US presidential election, the monetary policies of major central banks, the fear of sporadic Covid-19 triggered lockdowns across cities, and oil prices could keep investors on the edge.

Back home, a weak economy, coupled with rising Covid-19 cases and inflation above the Reserve Bank of India’s (RBI’S) comfort zone, geopolitical (India-china) developments, and upcoming India Inc’s secondquarter results could impact sentiment, analysts said.

According to Andrew Holland, chief executive officer at Avendus Capital Alternate Strategies, the potential US political battle for the Supreme Court nomination after the death of Justice Ruth Bader Ginsberg has focused attention towards the US election in November. Most political analysts, he said, now predict a close race between President Donald Trump and Democratic candidate Joe Biden. “Given that there will be a postal ballot in a large number of ‘swing’ states, the actual results of the election may not be known for days or weeks; even then, one can assume that these numbers may be contested. And it is this what worries the market — not an outright victory for either of the candidates,” Holland said.

In India, since their March 2020 lows, the benchmark indices — Sensex and Nifty 50 — have gained 47 per cent and 48 per cent, respectively, on the back of strong foreign flows and active participation by domestic retail investors. In case the liquidity flow reverses, analysts expect the Indian markets to correct sharply. Profit booking, according to Holland, may be seen more actively in mid- and small-caps in the short term.

Niall Macleod — a strategist at UBS, in a September 17 a note co-authored with Jiamin Shen — said: “Ordinarily, we are not expecting the US election to significantly impact Asian equities, but with the equity markets already trading one standard deviation expensive, events may cause much bigger moves than normal.”

Besides the Assembly election in Bihar and the Q2FY21 results of India Inc, new issues/initial public offerings (IPOS) of companies may see investor’s book profit and rotate money from the secondary to the primary market.

According to data made available by Geojit Financial Services, 80 firms have approached the Securities and Exchange Board of India to get the necessary approvals for tapping the primary market through the remainder of FY21. These firms are planning to raise ~51,515 crore, the brokerage said.

“Chemcon Speciality Chemicals, CAMS, Mazagon Dock Shipbuilders, UTI Asset Management, etc, will fall under the mid- and small-cap segments, which is a market segment that has attracted a lot of interest from retail investors. Retail participation is likely to be high in the upcoming issues as well, which can put a limit the rise of the frontline indices amid volatility,” said G Chokkalingam, founder and chief investment officer at Equinomics Research.