Economic Data, Budget Expectations to Drive Markets | CORPORATE ETHOS

Economic Data, Budget Expectations to Drive Markets

By: | January 27, 2018
stock market

Week that was…

Both Nifty and Sensex hit an all-time high of 11110 & 36268 this week, led by strong domestic and FII flows. Positive global cues and revival in earnings supported the underlying sentiments. Nifty benchmark index rallied 1.6% for the week, while investors are acknowledging the risk of premium valuation.

Market continued to be buoyant and is making fresh peaks as the Q3 results till date indicates strong signs of revival in corporate earnings. In the latest World Economic Outlook, IMF has projected India GDP to grow at 7.8% which is helping the investor sentiments. The expectation of strong economic growth and fiscal discipline has led to gradual decline in government 10yr bond Yield. The rally was broad based led by IT, Oil & Gas, financials, metals, pharma and PSU banks. While, the index heavy weights from private sector banks which reported strong earnings led from front. The Nifty PSU Bank index gained on expectation of announcement of the first tranche of capital infusion plan in this fiscal itself for addressing regulatory capital requirement and allocation of growth capital. On global front, positive cues from global market followed by consensus in US senate on spending bill bolstered the sentiment. As per the expectation, the government has approved Rs.88000cr first tranche of PSU banks; however market was concerned about higher capital allocation to the weakest banks which has recently seen a sharp run-up in prices. F&O expiry, long weekend, oil prices at 3 year at $71/bbl, lack of fresh triggers post a series of new high and sell-off in PSU banking stocks limited gains for the week. While, the Mid & Small cap index were the key underperformers due to the expensive valuation.

Week ahead…

Earnings upgrade is more likely after seeing the initial set of results but the current rich valuation and upcoming economic events may interrupt aggressive buying. Another worry for the market is steady up move in crude prices which is posing a risk. Currently investors are acknowledging the risk of premium valuation and are gradually shifting their focus to defensive sectors like IT & pharma due to revival in outlook. The week ahead is eventful with slew of economic data (IIP, 8 core industries, fiscal deficit and GDP data) but the major event is the union budget and market will likely to brace more volatility.

Mr Vinod V Nair is Head of Fundamental Research, Geojit Financial Services Ltd.