Fiscal deficit numbers, global economic data to drive markets this week

This week, investors would start with their reaction on results of Reliance Industries and ICICI Bank. The earning season will pick up pace with results from several key sectors including IT, Banking, Auto and FMCG. Within banking and finance – IndusInd, Bajaj Finance, Axis Bank, Kotak, IDFC First Bank would be declaring their results. From the Auto and FMCG sector, Bajaj Auto, Maruti, HUL, Nestle and Tata Consumer would release their Q4 numbers. Management commentary will hold key importance to understand the near term growth drivers.

Apart from results, investors will closely watch fiscal deficit data for March as well as the financial year 2022-23 on April 28. India’s fiscal deficit widened to Rs 14.54 lakh crore in April-February 2023 from Rs 13.17 lakh crore a year earlier. Investors would also keep an eye on key global events such as Bank of Japan interest rate decision and GDP data for several important economies. Countries like the US, Euro zone, Germany, France and Italy would announce their Q1 GDP data during the week and would provide an indication on global economic health.

Furthermore, the IPO market would be back in buzz with Mankind Pharma hitting the street with IPO size of Rs 4,326 crore. The issue will open on April 25 for investors with a price band of Rs 1,026 – 1,080. The company is a major domestic player in healthcare products with leadership in many brands.

Last week, Nifty reacted to weak results posted by TCS and Infosys and thus snapped its three – week gains to end 1% lower at 17,624 levels. Further, global cues were feeble on account of mixed corporate earnings and fear over further rate hike by the US Fed, which also resulted in some profit booking. However, the broader market showed positive momentum with Nifty midcap100/Nifty smallcap100 up 0.7%/0.3%.

Q4 earning season started on a disappointing note with technology giants Infosys and TCS reporting a poor set of numbers along with weak management commentary. Nifty IT index nosedived and ended the week with more than 5% loss. However, midcap IT companies gave a surprise with Cyient and Mastek beating the street estimates. IT sector would continue to remain in focus this week as well with Persistent, KPTI, LTTS, Coforge, LTIM, TechM and Wipro set to declare their quarterly results during the week.

State budgets for 2023-24 were released recently, an analysis of which confirms that states have budgeted a fiscal deficit of 3.1% of GDP in FY24E versus 3.4% of GDP in FY23RE and 2.7% of GDP in FY22. Combining the 2023-24 budgets of the Union government and state governments suggests that the combined fiscal deficit is budgeted to decline to 9.0% of GDP in FY24BE, from 9.8% of GDP in FY23RE (and 9.4% of GDP in FY22). The combined capex of the government is budgeted to rise to 5.7% of GDP in FY24BE, up from 4.9% of GDP in FY23RE. This shows continuity in government spending on capex which would be favourable for sectors like capital goods, cement, infra and industrials.

(The writer heads retail research at Motilal Oswal Financial Services Limited)