What will move the markets this week?

Indian markets have performed quite well in recent times. In the last one month,  Sensex and Nifty have gained around 3.5% while returns in US and European markets have lagged. US markets gave around 1% return while European markets rose around 2% in a month. Now let’s look at factors that will move the market ahead.

Earnings result
Bank results were good but FMCG and IT showed muted numbers. This week companies like Adani, HDFC, TVS, Hero Moto Corp will come up with earnings.

One thing that we noticed in the October-December quarter was the K-shaped recovery in the economy. Companies catering to high-end strata be it fashion, retail, tourism or sin goods were in a better situation. While companies targeting the lower, mid-segment of income did not fare that well. This includes FMCG companies, QSR (Quick Service Restaurants), paints, adhesives etc. Even this time the condition of the rural economy is still a concern, small FMCG products are not doing well. So, the results will give us a further idea about that.

FPIs inflows and macro picture

Markets witnessed an inflow of Rs 11,631 crore rupees after being buyers in March. However, at the end of April buying has become more aggressive. This might have to do with less-than-expected GDP data from US and Europe.

It’s all about dynamics between countries and that dynamic is indicated by the exchange rate. So the rupee has appreciated from 82.2 to 82.8. against dollar. The US is facing headwinds, there are banking crises, GDP came less than expected but the devil lies in the detail. It fell mainly due to low investment in inventory and that makes sense because of already elevated inventories.

However, consumer spending and service spending is strong. While jobless claims were less than expected last week. Business investment is low. While core inflation has inched up more than expected. Core inflation defines expectations and that’s why we can expect the Fed to keep rates high. The market is pricing just one more rate hike but if Fed indicates that the rate hike may continue then we might witness FPIs outflow and a fall in rupee.

Similarly,  in Europe also the economy is just ebbing while its CPI went up. So, all that points to a rate hike also from ECB.

Then we also have our domestic data like PMI, auto sales numbers etc. We can say this is an important week for the auto sector. Auto sales numbers are coming and so does the results of companies like tata motors. Manufacturing PMI is in the expansion zone for long time.

So all these factors will determine how markets will move this week.