With the earnings season around the corner and economic data indicators offering a mixed picture, investors need to take into account the bigger risk they may face in the coming months. The Reserve Bank of India painted a rosy outlook for households and industry in its reports, however private surveys have presented a mixed view of India’s economic growth.
Industry sectors such as electricity generation, airlines and bank credit are seeing strong growth performance compared to previous years. However, even though rail freight traffic is showing some token of improvement, expansion in sectors like iron ore, coal and cement have been weaker. In addition, analysis from Centre for Monitoring Indian Economy (CMIE) shows a slow revival in consumer sentiment, while FSN E-Commerce Ventures has attributed downward pressure in fashion spending to reduced discretionary spends by consumers. This can be seconded, with FMCG companies also noting stress in rural demand.
Moreover, auto sales growth decelerated in the quarter and below-normal monsoon rains are predicted, pointing to further weakness in the local economy. Projects of 20 percent earnings growth for the Nifty index may be at risk of resetting if pressure on domestic demand increases.
Given the situation, investors should keep a close watch of their finances, reflecting on how global and domestic events may affect the market and their investments. Among the companies, Craftsman Automation is riding the commercial vehicle momentum, while GM Breweries are enjoying strong growth prospects. With the gas pricing reforms, CNG distribution companies are likely to benefit, while sugar manufacturers might experience only a short-term surge in profits due to the global price spike.
The growth shift in favour of equity markets, away from the traditional fixed income ones, is not over yet, yet the venues have changed from buying bonds to exchanging them. With the onset of electric vehicles, Tesla’s CEO Elon Musk is revolutionizing personal transport and the way we perceive environmental protection. To add to the respite of individuals, the recent rate hikes have been put on hold giving housing sector a breather. Incumbent Chief Minister of Rajasthan, Ashok Gehlot, is again facing a stern test with the possible ousting of Sachin Pilots from the party.
All things considered, unpredictable geoeconomic and geopolitical climate have caused an overall deterioration of the economic outlook worldwide. Based on the agreement between OPEC and allies, the global output cut may not be enough to reverse the situation, while India’s formidable heatwave problem should prompt the abandonment of the use of fossil fuels. Intel’s switch to integrated new foundry business structure could potentially split the market and is worth looking at. Lastly, stock market investors may want to consider technical picks such as Redington, Tata Chemicals, TCS and Zinc.
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