Equity markets will be watching if President-elect Biden walks the talks on raising taxes and stringent financial regulations
Some of the key results scheduled this week are Bata India, GAIL India, Mahindra & Mahindra, NTPC, IDFC Ltd, RCF and Tata Power Ltd, among others
Finally, the uncertainty surrounding the next US President is out of the market's way. Democrat Joe Biden has defeated Republican rival Donald Trump in the US Elections 2020. With that, other cues such as the second wave of coronavirus in various parts of Europe and the US, and developments related to Brexit are likely to back on investors’ radar screens.
In a run-up to the US elections, global equities have already rallied anticipating more stimulus. Until the scope and size of the much-awaited coronavirus relief package is known, analysts expect the market to take a breather. Of course, equity markets will be watching if President-elect Biden walks the talks on raising taxes and stringent financial regulations. Further, if any of the above-mentioned downside risks play out, then a correction is on the cards, analysts caution.
Back home, the September quarter earnings have entered their last phase. Some of the key results scheduled this week are Bata India, GAIL India, Mahindra & Mahindra, NTPC, IDFC Ltd, RCF and Tata Power Ltd, among others.
Many corporate earnings that were announced last week were better-than-anticipated. For instance, in the financials space, the country's largest lender State Bank of India posted robust performance with loan growth improving 6% year-on-year. The management commentary on retail loans was optimistic and expects this segment to continue to drive loan growth. Housing Development Finance Corporation Ltd’s (HDFC) September quarter earnings also showed all the signs of a swift recovery after a tepid quarter due to the pandemic.
While Q2FY21 earnings have been a surprise on many fronts, investors shouldn’t expect a repeat of such performance going ahead. Management commentaries indicate that there is no further scope for cost rationalisation. Also, it remains to be see if demand recovery sustains beyond the festive season.
Meanwhile, on the macro front, India’s manufacturing purchase managers’ index (PMI) rose to 58.9 in October- highest in more than a decade. Similarly, Services PMI expanded at 54.1 – for the first time since the coronavirus pandemic hit. But investors are advised not to get carried away by this sharp reversal. Considering the sample size of IHS Markit's PMI survey, it is quite likely that pain of India's large unorganised sector is not captured in this data. On the ground economic recovery could take longer than indicated by the PMI, economists said.
Data on October auto sale and Goods and Services Tax (GST) collections was also upbeat. GST collections surpassed ₹1.05 trillion in October, rising 10% on a year-on-year and monthly basis. However, tax experts are doubtful if this trend would sustain beyond the festive season.
India's inflation rate for October and industrial production data for September will be announced on 12 November. According to Teresa John, economist at Nirmal Bang Securities Ltd, “Consumer Price Index or CPI inflation for October is likely to remain elevated at 7.08%, only marginally lower from 7.34% in September on account of high food prices. We expect Wholesale Price Index to rise to 1.74% in October from 1.32% in the previous month," she said in a report on 6 November.
“The index of industrial production (IIP) may decline by 3.5% y-o-y in September after a 7.3% decline in August. The recent uptick in high frequency indicators and an improved Gross Domestic Product reading in 2QFY21 (due November 30) will provide some comfort to the Reserve Bank of India. We continue to expect up to 50 basis points of rate cuts as inflation eases," she added. One basis point is one hundredth of a percentage point.
Meanwhile, the National Stock Exchange and Bombay Stock Exchange will conduct a special one-hour Diwali Muhurat trading on 14 November Saturday . Both will permit trading for an hour, starting 6:15 pm. Note that the exchanges will remain closed on the occasion of Diwali Balipratipada on November 16 and trading would resume from Tuesday.
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