The Indian equity market is likely to remain under pressure and rangebound over the next few months. This comes as global central banks, led by the US Federal Reserve look at a possibility of hiking rates aggressively to tame inflation. Back home, the Reserve Bank of India, too, remains data dependent in its endeavour to keep inflation in check and pursue an aggressive monetary policy stance.
With the monsoon set to start in the country this week, the Meteorological Department has placed the odds of El Nino -- which can affect wind patterns and trigger both floods and sharply reduced rains -- at 60 per cent.
The government on Thursday banned exports of non-basmati white rice to boost domestic supply and keep retail prices under check during the upcoming festive season. There would be no change in export policy of par-boiled non-basmati rice and basmati rice, which forms the bulk of exports, the food ministry said in a statement. Non-basmati white rice constitutes about 25 per cent of total rice exported from the country.
There is a substantial possibility of the emergence of La Nina, the opposite of El Nino, which invariably has a positive influence on the monsoon.
A depression over the southeast Arabian Sea, south of Porbandar in Gujarat, is likely to move northwestward and intensify into a cyclonic storm, the India Meteorological Department said on Tuesday.
A prolonged break in monsoon rains in most parts of the country is threatening to hit the yield of kharif crops. It could even delay the upcoming rabi sowing. Major agricultural states, such as Maharashtra, Madhya Pradesh, Andhra Pradesh, Punjab, and Gujarat, have witnessed a deficit of 30-80 per cent in southwest monsoon rainfall in August compared to the long-period average for the month. Meteorologists see no big revival in monsoon rains from hereon, though they forecast "some activity" over the Bay of Bengal on September 5-6.
Globally averaged temperatures in 2017 were 0.90 degree Celsius warmer than the 1951 to 1980 mean, according to scientists at NASA's Goddard Institute for Space Studies in New York. That is second only to global temperatures in 2016.
While India won't be immune to global spillovers, we need to create the macro preconditions for sustained growth. Policy agility, prudence, and resilience will be key, suggests Sonal Varma.
The Indian markets have seen a good run in the last three months with the S&P BSE Sensex rising around 7 per cent and the Nifty50 moving up 7.5 per cent. The next leg of the market rally from here on, analysts suggest, will be driven by a growth in corporate earnings over the next few quarters. That said, they do not expect material / sharp downgrades to India Inc's earnings estimates despite headwinds for the economy.
"The season averaged maximum temperatures in Himachal Pradesh, West Rajasthan, Konkan, Goa, Coastal Karnataka, Kerala and Arunachal Pradesh are likely to be higher than normal by 0.5-1.0 degree Celsius," the Met department has said in its forecast.
Deficient rains can shave 50-80 basis points off gross domestic product and hurt consumption.
'Earnings will be the catalyst for markets to march higher from here on out.'
'Markets are not expensive; they are fairly priced.'
'India is an equity market with a breadth and depth of companies to invest in.'
According to the global financial services major, inflation may remain sticky, with a possible El Nino effect on the monsoon likely to push up food prices and geopolitical uncertainties seen pumping up global commodity rates.
With temperatures remaining above normal since November, this winter could well be the warmest ever recorded not only in North India, but across the country.
Among the Sensex firms, Bajaj Finance emerged as the biggest gainer by climbing 2.95 per cent. Tata Motors, Bajaj Finserv, IndusInd Bank, Sun Pharma, Mahindra & Mahindra, State Bank of India, Larsen & Toubro, HDFC, HDFC Bank, Maruti, Reliance Industries and Bharti Airtel were the other major winners. HCL Technologies, Axis Bank, ICICI Bank, Tech Mahindra and Titan were among the laggards.
Inflation data, both at domestic and global level, interest rate scenario in the US, geopolitical situation and general elections in 2024 are some of the major factors that would influence trading in the equity market this financial year, analysts said. Besides, foreign fund trading activity and global trends will also dictate terms in the equity market going ahead. Equity markets across the globe faced major challenges in FY23 due to concerns over high inflation, which resulted in increase in interest rates around the world, lowering investor sentiment, experts added.
The UK body's forecast comes after the UN agency World Meteorological Organisation warned that there is more than 50 per cent chance of El Nino happening this year. El Nino is caused by an abnormal warming of the eastern Pacific Ocean and its impact would cause droughts and floods.
The Reserve Bank of India (RBI) will maintain the policy repo rate at 6.5 per cent during its upcoming June 8 announcement, considering the easing of retail inflation in April and the potential for further decline, indicating the effectiveness of previous policy rate actions, anticipate experts. Headed by Reserve Bank Governor Shaktikanta Das, a meeting of the six-member Monetary Policy Committee (MPC) is scheduled for June 6-8. The decision of the 43rd meeting of the MPC would be announced on Thursday, June 8.
After El Nino and droughts hit pepper in Vietnam, causing a production drop of around 20%, Indian market is hoping that the global supply position will remain tight this year.
'The last time we had such a late withdrawal of monsoon was in 1960 or so.'
The challenge for the RBI in 2024 is likely to be less about containing elevated inflation and more about curbing excessive financial market exuberance and a 'problem of plenty', notes Sajjid Chinoy, Chief India Economist JP Morgan.
With the Nifty50 just about 3 per cent away from its all-time closing high of 18,812 points, analysts at BofA Securities suggest investors book profit. Their reasons for the advice include risks like the possibility of a cut in corporate earnings growth forecasts, high valuation (one-year forward P/E of 19.5x), interest rates staying elevated for longer-than-expected and credit tightening. Going ahead, they expect the Nifty50 index to drop to 16,000 levels - down nearly 12 per cent from the current level of 18,255 points, which they believe would be a good time to buy.
India's economy continues to be robust, but downside risks such as rising crude oil prices, adverse weather conditions, and the global banking crisis outweigh the upside potential in gross domestic product (GDP) growth in the current financial year (FY24), the finance ministry said on Tuesday in its Monthly Economic Review for March. "We reiterate that downside risks to our official forecast of 6.5 per cent for real GDP growth in FY24 dominate upside risks," the review said. "Opec's surprise production cut has seen oil prices rise in April, off their lows of low-seventies per barrel in March.
Cyclone 'Biparjoy', the first storm brewing in the Arabian Sea this year, has rapidly intensified into a severe cyclonic storm, with meteorologists predicting a 'mild' monsoon onset over Kerala and 'weak' progress beyond southern peninsular under its influence.
Retail inflation fell to a 15-month low of 5.66 per cent in March, mainly due to a decline in food prices, government data showed on Wednesday. The inflation figure in March is within the RBI's comfort zone as it is below 6 per cent. The retail inflation based on Consumer Price Index (CPI) was 6.44 per cent in February 2023 and 6.95 per cent in the year-ago period.
"This warming trend is alarming," said NASA Administrator Bill Nelson.
The first five months of 2023 have witnessed at least six major events/trends that augur badly for global economic and socio-political prospects, points out Shankar Acharya, former chief economic adviser to the Government of India.
'The Fed rate will peak in the range of 5.1-5.3 per cent during the second quarter of CY23 and will most likely stay there for a while before rate cuts start in CY24.'
Mohapatra said there is a 40 per cent chance of a normal rainfall, 22 per cent above normal, 12 per cent excess and 18 per cent below normal.
Dr Shreekant Sambrani pays tribute to M S Swaminathan, renowned agricultural scientist and a lifelong crusader against hunger who passed away in Chennai recently.
'I'm pitching India for the strengths we offer, including the English language, engineers, doctors, nurses, professionals, innovative talent of startups.'
The record temperatures in May were accompanied by other extreme events, including very heavy precipitation in parts of Europe and the southern US, and widespread and severe coral reef bleaching.
Here's a map showing the monsoon situation across the country.
Here's a map showing the monsoon situation across the country.
In another forecast for August, IMD Director General Mrutunjay Mohapatra said monsoon is also likely to be normal in the month.
'All El Ninos are not associated with the deficient monsoon.'
Markets ended lower with private banking majors and index heavyweights ITC and RIL leading the decline.
Should Modi win the elections, his government will face its first credibility test with markets when he delivers a budget.
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