All Eyes On Earnings And Elections As Nifty Scales Historical High PE
If you are an investor who was not on the desk for the past five trading sessions and you thought you had missed quite a lot during this phase, then you would only be partially correct. This is because price wise, the Nifty index has not moved much as it has been contracting in a range for the past five trading sessions. The markets seem to be going nowhere so far, with bouts of gain and pain. But, certainly along with the rising temperature, the volatility index India VIX is on the rise as it has witnessed a sharp jump of over 15 per cent to trade above the 21 mark and trading at the highest level of calendar year 2019. Also, the stock-specific action has been witnessed. Additionally, the market participants were waiting for the manifesto of the NDA government as the participants feared that the BJP manifesto will try and promise some doles following the Congress manifesto promising Rs 72,000 dole to the poor. However, the ‘Sankalp Patra’ which is the name given by the BJP to its manifesto, stated it aims to make India the third largest economy in the world by 2030 and promised Rs 100 trillion investment in the infrastructure sector. It has pledged to bring down the percentage of families living below the poverty line to a single digit in the next five years. Apart from this, the International Monetary Fund (IMF) trimmed its economic growth forecast for India by 20 bps each from its January predictions to 7.3 for FY20 and 7.5 per cent for the next fiscal.
On the global front, the traders received a twin blow; first, the International Monetary Fund (IMF) cut its outlook for the global growth to the lowest level since the financial crisis; and second, the US President Donald
Trump threatened to impose tariffs on $11 billion worth of European Union (EU) products, and in response the EU warned it stands ready to retaliate. Meanwhile, the minutes from the latest Federal Reserve meeting signalled that the central bank is in no rush to raise interest rates with the Fed adopting a patient policy approach. In the European region, the ECB left key rates unchanged and its President Mario Draghi in his press conference said risks to Eurozone economic outlook remained skewed to the downside. Meanwhile, on the Brexit front, the EU and UK agreed a ‘flexible extension’ until October 31, leaving doors open for an early exit if PM Theresa May manages to clinch a Brexit deal.
Going ahead, a host of events are lined up which will keep the market participants at the edge of their seats. At the same time, we are also at the highest PE levels historically. IT marquee names such as Infosys and TCS are going to kick-start the earnings season for the quarter ended March 2019 and investors will be looking forward to the management commentaries as well. Moreover, it would be a litmus test for some of the stocks which had seen a sharp run-up in the short term and whether the quarterly earnings will justify their lofty market valuations. Also, the festival of democracy begins with the first phase of elections in the world’s largest democracy getting underway on April 11. On the macro front, industrial production data for February and CPI inflation for March will be watched. The inflation will continue to be a key point to look at in the coming months as the rising crude oil prices and fears of El Nino could act as spoilsports. Globally, the earnings season on the Wall Street will begin on Friday with JP Morgan Chase & Co and Wells Fargo & Co reporting their quarterly results and also the progress of US-Europe trade talks will be monitored.
