17-Nov-2022
2 mins read
Markets sustain Q2 earnings, what are the next triggers
Indian Markets have been in a bullish trajectory for the last few weeks thanks to the global rebound and the positive news flows from the corporate earnings and the stabilizing macro factors. Indian US markets have shown a significant bounce from the lower levels after the economic indicators started to show some bottoming out process with inflation making peaks and the other negative factors making bottoms.
The fund flows activity was also positive from both the foreign institutions and the domestic investors which has provided very strong support on any corrections due to the global and bad news flows. The slide in the crude oil prices and the topping out signals in the rupee also added to the positive sentiments in the ongoing bullish momentum.
India Inc. Q2 earnings have been as per the market expectations excluding the BFSI theme which have come out with stellar Q2 numbers barring a couple of exceptions. Companies that have high exposure to the commodities as their input cost have shown some weak numbers such as Cement and Metals thanks to the soaring commodity prices and weakening rupee which had a dent in the operating profits. The consumer sector has been under pressure in Q2 but the numbers are expected to improve thanks to the strong festive season and improved market sentiments.
The post-Covid boom in corporate earnings, as expected, seems to have ended where the companies saw margins and profits shrink in the July-September quarter. The real impact of rising crude oil, global slowdown, burning inflation, and weakening rupee will be seen in Q3 which major corporates have already highlighted in their recent media interactions.
The Q2 earnings were adversely affected by the higher cost of raw materials and energy, besides a reversal in the interest rate cycle, resulting in a higher interest expense for companies in the non-financial sectors. The next quarterly earnings are likely to be more dependent on macro factors and consumer spending where robust numbers are expected to continue from banking and Telecom while many other sectors like IT, pharma, and Oil & Gas are expected to remain flat to muted.
For the coming days, below are a few more triggers that will drive the volatility in the markets:
- Pre Union-Budget moves
- Mid and Small-cap stock performance
- Global market volatility
- News flow from Russia and Ukraine War
- Crude and Rupee Volatility
- Inflation and growth numbers from US & India.
Markets are expected to remain volatile in the near future thanks to the ongoing macroeconomic new flows and the geo-political situations prevailing in the European region. The crude and the rupee movement against the dollar will also be tracked by the market participants in the coming days ahead of the union budget which lay the foundation for the next financial year. On the flip side, the corporate earnings for the third quarter will also play a vital role in the movement of the index as the said period would have faced the heat of soaring inflation and lowering growth.
