Markets are not showing signs of pessimism due to the spread coronavirus in China, but are watchful the epidemic could still wreak havoc on the global and indirectly to the domestic economy. Domestic markets are holding up quite well after the Budget 2020, when equities cratered and spooked the investors, but since recovered with the index now hovering above the 12,000 levels
Meanwhile, some of the major global indices have become wobbly lately due to the impact the coronavirus could have on the global economy. The S&P 500 lost about 1.5% in trade on Friday, while major European indices also lost some stoking fears that volatility is not quite behind for the markets.
The US President Trump’s visit to India will also be the highlight for the week, though the Indian markets have already discounted any hopes of a trade deal. Trump’s visit, though, marks an important step in the Indo-US relationships, and the markets will be keenly watching the developments.
In the coming week, all eyes will be peeled on the Gross Domestic Product figure that will be announced on Friday. This could also set the trend for the market over the coming weeks and also indicate whether the Indian economy is recovering.
The October-December 2019 quarter could show some improvement over the measly 4.5% year-on-year rate posted in previous quarter, the high frequency data during the last months of 2019 has not been quite encouraging.
To an extent, there was an expansion in some of the areas of the economy as crucial auto sales numbers were not so grim during the festive season. Still, there are not many signs that the economy has picked up just yet, despite the fiscal and monetary stimulus in much of 2019. Ratings agency Moody’s Inc has also slashed growth projects to 5.4% from 6.6% for 2020 due to domestic factors as well as the negative fallout of the novel coronavirus.
Market watchers have also started to pencil in high inflation risk ahead which may also signal that the macro stimulus through rate cuts may be nearing an end for now. The Monetary Policy Committee minutes also show that RBI’s worried about inflation.
Meanwhile, the just concluded Q3 results season has been quite dull even though there some pockets did well to show expansion. But the scope of earnings don’t suggest that the earnings growth may pick up anytime soon.
Some stocks cannot quite find their footing in the market. The ONGC Ltd stock sank to its multi-year low last week, and it seems with oil prices low, the outlook remains shaky.
Besides, Nifty is expected to undergo a change in the next week. Yes Bank Ltd is being replaced with Shree Cements Ltd. But as we have seen in the past, new stocks that make it to the index are usually at a high premium, and Shree Cements is no exception Although, a decent amount of buying could be seen in this counter as index funds will be making a switch to this stock.
All in all, there are no major triggers for the stock though the fund flows into the markets continue to be robust and domestic institutional buying is supporting the markets. On the macro front, the low oil prices have led to some cuts in domestic oil prices and which should provide some consolation support for the market.