Market Outlook

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Market last week

Despite sharp decline in oil prices, markets were volatile and traded in a narrow range on account of domestic liquidity concerns and weak global cues. Receding optimism on US China trade deal impacted the global market momentum.

Investors’ turned cautious in the holiday shortened week due to uncertainty regarding US china trade deal and FED policy. However, stock specific buying was seen on the basis of quarter results and decline in oil prices. The market is gradually factoring downgrade in earnings in H2FY19. Market started this quarter with an earnings expectation of about 15% growth in PAT on a YoY basis on Nifty50 index stocks. As on 2nd Nov, 38 stocks have given results where PAT is down by -2%. If we remove the loss making company’s like Tata Motors, PAT is up by 4% on a comparable basis of 10%. This is more like a replica of Q1 result which had a growth of about 5%. We are bound to see further downgrade in earnings growth over the next one to two quarters.

Week ahead

In the short-term, we are expecting some relief in the market given a big correction in the last two months and rebound due to technical factors. We are trading below the 200 days moving average and we are in oversold region. Stable 10 year bond yield, INR and fall in oil prices will be supportive. For the week ahead, CPI inflation, WPI and IIP are key events. CPI and WPI inflation is likely to moderate.

Posted: November 2018

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