THE TRIGGERS THIS WEEK
The election results are out. The RBI has reduced rates. Earnings for Q4FY19 and FY19 are almost done and over with, at least of companies that matter. So what do we look forward to now?
As we begin this new week, the triggers that lay ahead are many but only one or two will have some impact.
First and foremost, immediately on the radar is the IIP data for April and retail inflation (CPI) and wholesale inflation (WPI) numbers for May. IIP and CPI comes in on Wednesday and WPI on Friday. Even if growth shows a further slowdown, it should not come as a shocker as this is now an established fact. Only if the fall is too steep; well, how much more of a fall are we talking about – in March IIP was in the negative. Thus a negative or a slowdown is a given.
Regarding inflation, seasonally, fruits/vegetables and food items which have been low typically show a price rise as summer heat catches up. So we will see a spike up.
But more than the IIP or the inflation, it is now the progress of the monsoon which will decide the course of the indices. Monsoon has already arrived in Kerala on the 8th of June, one week delayed as predicted by both Skymet as well as IMD. What will be watched its progress. With 50% of India’s farmland depending on these rains for irrigation, the monsoon progress will undoubtedly be the most decisive factor. On 13th June, Thursday, we will get the update for the next two weeks from IMD and Skymet too will issue its predictions this week. Meanwhile Mumbai got some relief from the rain with some moderate premonsoon showers yesterday night. Hope it’s a prelude to more rains and normalcy across the country
On the global front, trade war between US and China will be closely watched. If the war of words does get translated into a battle of tariffs, the low global sentiments will have a dominoes effect on the India markets. Maybe the FIIs will continue to see value in India despite the trade war due to a stable Govt at the center and they might continue to pour in more money. According to the latest depository’s data, FPIs invested a net sum of Rs 1,915.01 crore in equities and Rs 5,180.43 crore in the debt segment during Jun 3-7, taking the cumulative net investment to Rs 7,095.44 crore.
As IMG Chief Christine Lagarde said, “"The first priority should be to resolve the current trade tensions -- including eliminating existing tariffs and avoiding new ones -- while we need to continue to work toward the modernization of the international trade system. This would be the best way for policy makers to give more certainty and confidence to their economies and to help, not hinder, global growth."
Talking about global growth, Japan’s Q1 GDP was announced today early morning. It’s economy grew at an annualised rate of 2.2% in January-March, slightly more than the initial estimate of a 2.1% expansion. Sequentially, GDP grew 0.6%, compared with a 0.5% growth in the initial reading and the median forecast.
China will announce its Industrial production growth for May on Friday, 14th June and in this shadow of trade war, these numbers will have an impact. Of course, next week, 19th June will see the US Fed making its decision on the interest rate.
Last but not the least, the direction of crude oil prices will also be watched closely. The trade war and slowing global demand have as such pulled down the price of crude, moving to a 5-month low last week. This augurs well for Indian economy and keeps the rupee also in good and stable steed. A falling crude, in short, is good for the markets.
Well, we have a lot on our platter this week and these events will more or less trigger the indices. Let’s look skywards and pray that rain Gods be merciful this year!