Markets to be bearish ahead of US elections, key earnings

The domestic market, this week, is likely to continue its downward slide amid cautiousness among investors ahead of the United States presidential election on November 5.

Given potential impacts on key Indian sectors like IT, pharmaceuticals and textiles, a cautious outlook will prevail.

In addition, muted earnings from corporates is likely to keep sentiments dampened. Markets will react to results from ICICI Bank which came over the weekend while Airtel, Sun pharma, Ambuja Cements, BHEL, Maruti Suzuki, L&T, Dabur among others, will be announced during the week.

On the economic calendar front, India’s manufacturing PMI, fiscal deficit, core sector and GST collections data will be keenly watched. Also on tap will be China and US Manufacturing PMI, US and Europe inflation, and US unemployment rate.

Last week marked the fourth consecutive week of decline for Nifty driven by lacklustre earnings and persistent FII outflows. Nifty fell 673 points or 2.7 per cent to close at 24,181 levels.

Brutal selling was seen in the broader market with midcap 100 and smallcap 100 down around 6 per cent each. All the sectors saw profit booking with realty and metals down more than 7 per cent each.

Foreign investors pulled almost Rs1 lakh crore from Indian equities in October so far. There is a shift in investment flows towards China after the recent stimulus announcements. The People’s Bank of China cut prime rates by 25 basis points to boost spending. Rising US bond yield amid expectations of a modest rate cut by the Federal Reserve led to a weakness in global markets.

July-September quarter earnings have been lacklustre so far. We saw a mixed set of numbers from banks with HDFC Bank posting in-line performance while Kotak reporting a slight miss on earnings however IndusInd declared weak numbers.

Most of the FMCG majors like HUL, Nestle, Tata Consumer announced weak results on account of miss on volume growth and margin pressure.

On the other hand, Mid cap IT stocks like Coforge and Persistent systems showed a strong performance with management commentary providing improving growth visibility. Realty companies including Oberoi Realty and Godrej properties also came out with a good set of numbers.

On the positive side, the International Monetary Fund maintained its growth forecast for India at 7 per cent and 6.5 per cent for FY25 and FY26 respectively, which came as a breather. Even HSBC’s flash composite PMI data showed India's business activity has picked up in October after slowing last month, driven by solid growth in new orders and exports.

There was a lot of action in the primary market. Hyundai Motor India, the largest-ever IPO, made a lacklustre debut on the bourses and closed with a loss of 7 per cent from the issue price on listing day. Another big IPO of Waaree Energies opened for subscription, and received a blockbuster response from investors with record a 97 lakh applications, the highest received by any IPO till now.

(The writer is head of Research, Wealth Management, Motilal Oswal Financial Services)