Markets Awaiting Outcomes Of Multiple Events To Seek Direction
The upcoming few days could be game-changer for the markets, not only here in India but globally too. Market participants would be keenly watching events like the meeting between the Presidents of the US and China at the G-20 summit, while back home, the GDP data, RBI meet and state election results would be keenly watched.
To begin with, the much-talked about liquidity issue has become a priority of the country’s central bank RBI, which has announced plans to inject additional liquidity of Rs 40,000 crore into the system through open market operations (OMOs) by purchasing government securities next month. The RBI has already infused Rs 36,000 crore into the system through OMOs in October. This development would give some relief to the NBFCs hit by the liquidity crisis.
On November 30, the GDP data will be released (GDP data is released with one quarter lag). In the last quarter, the GDP growth was at 8.2 per cent. Further, in the first week of December 2018, the central bank’s monetary policy committee will meet to decide interest rates. In the previous meeting, the RBI had kept the rate unchanged, but it had changed its stance to “calibrated tightening”, which means it can raise rates in future. However, the cooling down of oil prices and some support to rupee might make the RBI maintain status quo in the forthcoming monetary policy meet. Besides this economic event, one more domestic event that might affect market sentiments is the outcome of the ongoing state elections.
On the global front, investors across the world would be keeping an eye on the US President Donald Trump and Chinese President Xi Jinping’s meeting at G-20 summit this week-end. This meeting is likely to give indications on whether trade war tension between the two would ease or further escalate. But earlier, the US government is considering tariff hike on existing USD 250 billion worth of Chinese products from 10 per cent to 25 per cent on the first day of the next year. Further, the US President has threatened to put additional tariffs on Chinese products worth USD 267 billion.
Meanwhile, the Bank of England on Wednesday has warned that Britain’s exit from EU without deal could trigger a recession which it has not seen since World War II. Further, without any transition period, the UK economy could shrink by 8 per cent, while housing prices could fall by ~30 per cent. Also, the pound could slump by almost 25 per cent. This is not what the Bank of England expects--it is a worst-case scenario based on a disorderly Brexit.
One thing that brought cheers among global investors is comment from Federal Reserve chairman Jerome Powell. On Wednesday, Powell commented that interest rates are just below the neutral range, which has led to speculation that the US central bank may take a pause on its planned series of rate hikes.
For the near term, we urge investors to be cautious. We believe that any negative outcome from these upcoming major events could trigger a sell-off, which might lead to correction across the markets. You might get stuck even in good investment for a while if you have entered at the wrong time and at a high price. Therefore, any correction in financially sound companies with no corporate governance issues, coupled with light balance sheet and positive prospects ahead can be considered for bottom-fishing. Editorial Markets Awaiting Outcomes Of Multiple Events To Seek Direction Subscribers can send their feedback and queries
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