Wait-N-Watch As Trumps Tweets And Crude Prices Tweak The Markets
Indian stock markets got into a bear hug yet again when the indices broke down ahead of the OPEC meeting and thereafter. The US State Department exhorted partner countries, including India, to reject energy imports from Iran. Thereby, despite higher production assurance from OPEC in the meeting, oil prices bounced back. Further, the abrupt shutdown at Syncrude Canada till the end of July triggered the fear that the prices will stay firm. The upshot of the OPEC meeting was augmentation of supply by one million barrels per day. Now, Saudi Arabia stands as the only leader capable of fulfilling the glut in demand glut. However, whether Saudi would be allowed to produce and export and whether it would be in the refined form leaves the question of crude output unresolved. All-in-all, crude oil prices are likely to remain elevated for some more period. The stocks of oil marketing and gas companies nosedived and dragged the Indian markets down, while the other sectors remained subdued. The dollar linked and defensive sectors of pharma and IT are the only sectors, along with FMCG, that have curbed the speedy fall in the markets.
President Donald Trump cautioned the global markets once again with escalation in the trade war. This trade war unleashed by Trump is bringing India and China closer. Since April, the two leaders Modi and Ping have met twice to strengthen bilateral trades. China took a step forward by allowing non-Basmati rice exports and relaxing taxes on imports of anti-cancer drugs and also assured sharing of river flow data. However, India is well aware of the dumping issues with China and is, therefore, mulling to impose tariffs on few Chinese items. Among the upcoming events, all eyes are on the US final GDP Q1 data. However, analysts have forecast no change in the GDP as the final Q1 GDP is seen growing at 2.2%.
Meanwhile, the rupee has breached its all-time low level to nearly 69.1, which has hit investor sentiments and thereby the markets. The rupee is expected to hit 70/USD by the end of this year. However, analysts are not worried about any depletion in forex reserves, as according to Moody’s, India is less susceptible to currency pressure due to its lower dependency on external debt. The data is to be released at the end of the week. The country is also expecting infrastructure output for May and fiscal deficit data to be released by the end of the week.
Indian markets saw negative June F&O expiry while entering Q2 of FY19. The Q1FY19 corporate earnings will drive the markets in the coming sessions with macroeconomic data to be released in the initial days of July. We had talked about markets remaining dicey for some more period, even till the year-end, with three big state elections keeping the D-street on the edge. Till then, we maintain our view about staying away from mid-caps and small-caps for now, as these stocks have been worsening the market bias. The defensives could be good bets to recoup the losses. Otherwise, wait-n-watch is the best strategy in the current market conditions.
