Home / Markets / Mark To Market /  As the results season ends, global cues may fuel the markets

As many listed companies announced their June quarter earnings, some of the uncertainty surrounding the results is fast fading. While revenues growth was certainly hit in Q1, operating profits were not as badly hit as much as the Street was expecting, thanks to sharp cost cuts. Bottom-lines of most companies were much fatter than forecasts.

Now the markets are likely to shift to developments related to global economic data and the coronavirus vaccine. Also, a key global event, the US-China trade review deal, which was scheduled for Saturday has been postponed. So, nervousness relating to the already sour US-China trade relationship is likely to weigh on investors sentiments.

Further, the mood among global equity investors is likely to remain cautious as confusion over the stimulus bill in the US continues. What’s more, the minutes of US Federal Reserve meeting conducted in July will be released this week. Key OPEC+ ministers will meet online to review strategies for poor compliance, a dominant topic of recent gatherings.

With the industrial production data and inflation providing contradictory signals, it remains to be seen whether the central bank maintains a status quo in its October policy meeting as well. Reserve Bank of India minutes released on Thursday will be interesting reading as the RBI treads the line between monetary stimulus and supporting the currency.

Poor IIP and core sector data are likely to pull down first-quarter gross domestic product of 2020-21, the data for which would be released this month-end.

Meanwhile, precious metals lost some of their sheen with gold and silver prices falling sharply in Indian markets, tracking restrained global rates. Positive news about the coronavirus vaccine seemed to have been party pooper for precious metal bulls. Gold and silver prices fell by 5% and 8% respectively, in the domestic market, in this week.

And, since we are closely following global markets, developments on the further stimulus package in the US, US-China trade tension would also be on investors’ radar.

Hero Motocorp reported an operating profit despite a steep fall in sales, while its stock ranks among the best performing auto stocks by far.

Among the surprise movers this week was travel and leisure stocks. Investors are betting that demand for travel and leisure services will increase once there is a vaccine.

But for some companies such as Siemens, the June quarter has been sluggish as capital expenditures are showing signs of slowing down.

Investors in Titan were disappointed that the costs cut were less than anticipated.

But for Pidilite, the demand recovery will be slow and gradual even as the management pointed that more than 90% retail outlets are open.

Investors are warming up again to debt funds. Post the Franklin episode, inflows in some of the debt funds have increased, particularly as yields are better than fixed deposits in many cases.

For the stock markets, the coming week will test the resilience of banking stocks. The new restructuring window allows banking companies some leeway on their loans to companies facing stress due to the covid-19 pandemic.

However, the Nifty Bank index well undershot the broader market this pandemic-polluted year. While the Nifty 50 is down about 8% from its highs, the Bank Nifty is down a sharp 33%. Much of the pickup in the broader market will now hinge on financial stocks, which account for over 35% of the weighting in the frontline index. This is something for government advisors to brood upon.

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