Mar­kets Ex­pected To Re­main On Ten­ter­hooks In H2FY18

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Ro­bust, in­terim macroe­co­nomic num­bers have be­lied the long run de­cline fore­casted in GDP at 6.2% from 7.3% in FY18. Fur­ther, op­ti­mism was driven by global mar­kets hit­ting multi-year peaks ahead of a dovish stance by Fed­eral Re­serve on in­ter­est rates. The up­com­ing CPI in­fla­tion is fore­casted at 3.45% YoY as against 3.36% in the previous month de­spite some re­lax­ation in food prices. How­ever, fuel price hike and in­crease in core in­fla­tion may keep the rate main­tained for Septem­ber 2017. Apart from food and fuel, the in­fla­tion num­ber could hit 5% driven by rise in hous­ing in­fla­tion. Like­wise, WPI in­fla­tion num­ber would re­port mar­ginal de­cline from 3.2% in Au­gust to 3.1%. How­ever, IIP is ex­pected at 3.5% YoY, i.e. an in­crease of 1.2% from Au­gust month. With the over­all high in­fla­tion fore­cast, mon­e­tary eas­ing by the RBI to cre­ate liq­uid­ity would be lim­ited to 25 bps cut in the com­ing pol­icy re­view.

Re­cently, In­dian bench­mark in­dices greeted cor­po­rate earn­ings with open arms, the earn­ings sea­son be­ing kicked off by TCS and In­dusInd Bank. Ex­pected pos­i­tive re­sults buoyed mar­ket sen­ti­ments, oth­er­wise mar­kets were headed for profit-book­ing. As it is, over­all cor­po­rate earn­ings for July-Septem­ber are ex­pected to post re­cov­ery, with bet­ter-than-previous-year’s re­sults af­ter a de­cline in the previous quar­ter. The re­cov­ery would be led by di­min­ish­ing im­pact of cash ban and GST roll-out. For in­stance, PAT for Nifty com­pa­nies is ex­pected to re­port nearly 12.8% growth as against a per cent fall in the previous quar­ter. More­over, op­er­at­ing profits and rev­enues are ex­pected to post 11.5% and 6.5% growth, re­spec­tively, as com­pared to the previous year. The sec­ond half of the year is set to post im­prove­ment in growth, with busi­nesses get­ting well-ac­quainted with the GST rules. How­ever, un­sat­is­fac­tory re­sults may cre­ate un­cer­tainty in the mar­kets, for now.

Over­all, mar­kets would re­main volatile amid earn­ings re­ports, fol­lowed by cor­po­rate an­nounce­ments by com­pa­nies com­pris­ing the bench­mark and broader in­dices. Mar­kets have had a great move­ment since Jan­uary 2017 af­ter year 2014. The stocks are seen ris­ing, but the econ­omy has seen a slow­down since mid2016. Now, with pre­mium val­u­a­tions and height­en­ing geopo­lit­i­cal ten­sions, FIIs are con­sis­tently pulling out money from In­dian mar­kets. The YTD net in­vest­ments of the FIIs have de­clined to Rs 32701 crore, while DIIs have been pour­ing money, with their YTD net in­vest­ments ris­ing to Rs 67,000 crore.

The big­ger pic­ture de­picts a halt to the con­tin­u­ous rally in the mar­kets post de­mon­eti­sa­tion but the sen­ti­ments still re­main pos­i­tive. Since Au­gust, mar­kets have seen con­sol­i­da­tion rather than cor­rec­tion. Cor­rec­tion in the form of profit-book­ing is yet to come and Nifty, as the rep­re­sen­ta­tive in­dex, may also wit­ness the 9300 level post the 9600-mark. Not just the global events but, go­ing for­ward, do­mes­tic events like De­cem­ber earn­ings fol­lowed by the Union bud­get and ex­pected pre­pone­ment of state and na­tional elec­tions would keep the mar­kets on ten­ter­hooks for the re­main­ing part of FY18. Sub­scribers can send their feed­back and queries on tech­ni­cals port­fo­lio guide to fnied­i­tor@dsij.in

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