Market Outlook

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Market last week

Nifty touched a 5-month low of 10,783 this week, largely due to aggressive selling by FPIs and weak investor sentiments. Slowdown in global economy, super-rich taxation, unending trade-war issue and geopolitical tensions triggered the losses. Downside in GDP estimates for FY20 to 6.9% from 7.0% earlier due to headwinds in global economy and slowdown in domestic consumption curtailed investor’s sentiment. FIIs were on a risk-off mode, in the last one-month Nifty50 has corrected by 8% given concerns over extension of slowdown due to uncertainty about US-China trade agreement, BREXIT and geo-political issues.

However, balancing act of RBI led by rate cut, adding liquidity to NBFC, Agri and MSME brought some relief for the market. Further, clear indication of the RBI as well as focus on transmission of the rate cuts had some positive impact on market. Indications from the government to announce measures to boost private investments and relaxation in super-rich tax for FPI’s fueled positive momentum in the market. Trend may be unpredictable in the near-term nevertheless stability in taxation, ease in liquidity, supportive measures and fall in interest rates will benefit the economy in the second half of the year.

Week ahead

Market was hoping for more than 20% growth in corporate earnings in FY20 for Nifty50 index stocks while Q1FY20 has started on a muted note. Out of Nifty50, of the 40 stocks announced results, the earnings growth is about 10% YoY versus expectation of 15%. The weakest performers are Auto, Metals, Oil & Gas and Telecom. With lowering GDP growth estimates, we expect further downgrade in corporate earnings. While interest rate cut is expected to provide some respite for the market in the near term. Going ahead investor’s will closely monitor government measures on supporting growth and FPIs tax issues.

Posted: August 13, 2019

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