Recent going market situation indicates that markets are highly volatile. Have you ever thought about whether your portfolio is safe in this scenario or not? If not, think about the issues that may affect your stock return for the upcoming next 6 months.
This year comes with a decline of 13 %, the rupee has been the worst performing currency in Asia. A fallen value of the rupee means a grow for exports as exporters earn in dollars. But overall, a depreciating domestic currency bumps up prices and abruptly the scenario changes as macro fundamentals look unsafe. This has made a big sentimental impact on the market in general your stock portfolio in particular. Indian market is no more the strongest in Asia’s stock market.
2. Oil Prices
Oil has impacted much in the stock market, oil has largely dependent on imports. Oil marketing companies will be in focus. Hike in global oil prices, which recently crossed $80. With US sanctions against Iran looming and Opec virtually refusing to toe the US line to boost supply, the price pressure is only generating. There is also talk of oil hitting $100 soon.
3. Elections 2019
The upcoming elections of 2019 have also created an impact. This is believed to be the biggest overhang for Dalal Street that’s keeping the suspense factor alive. Also, a few states are going to polls just before the Lok Sabha elections. Whichever way they go, that will affect the way your stock behaves surely.
A swinging trade war between the US and China means commodity stocks, in general, may hurt as both sides impose retaliatory tariffs. But India stands a chance to fill the trade empty as it looks to ramp up supply to the world. That brings a big light for select stocks with an export focus.
The rupee fall may bring back memories of 2013 taper tantrum. But macros fundamentals as a whole are looking a lot better. Though India retains the tag of the fastest-growing major economy in the world, the current account deficit is swelling. There may be worries over the fiscal deficit, but the government has tried to solve investor fears, saying it will stick to the 3.3% roadmap for 2018-19.
6. Earnings revival
As the economy gathers momentum, companies are getting their purchasing power back. Easing commodity prices owing to the global trade fight are coming as a boon for their profitability. If all plan executes well verse, an earnings revival that could set the course for rest of the year. But the cost of borrowing remains a big factor to watch out for, with yields hovering above 8%.
If the US sneezes, the world catches a cold that means the US weakens affect the whole world. The US Federal Reserve has just raised its policy rate by 25 bps, which boosts the dollar. A higher Treasury yield, in turn, pulls away capital from risky assets of emerging markets. The central bank has also reflected that there is more to come as it gets more confident about the strength of the US economy.
8. Global Cues
Any hard landing on Brexit (Britain’s exit from the EU) poses a serious global risk. British Prime Minister Theresa May is all out to get a deal on her own terms, but it’s easier said than done. Risk aversion can be a sudden fallout of any instability in emerging markets. The recent developments in Turkey, Argentina and Indonesia prove that. Additionally, geopolitical issues related to US’ sanctions against Iran and the Korean peninsula may have worldwide repercussions on shares.
9. Inflation and interest rate
This in a way decides the purchasing power of the consumer. Both retail and wholesale inflation has eased on the back of cooling food prices. Much of the stock behaviour is connected to this crucial parameter. The RBI has hit the spot by keeping a tight knot on inflation. The Reserve Bank on its part has raised the benchmark repo rate twice since June to 6.5%. Its monetary policy path holds big clues as to which way the market will move.
10. FII flow
This is a reflection of how much capital foreign investors bring into the country. Any slightest negative indicator has the ability to spark big outflows. This is the factor to keenly notice. The recent market crash is also a crude reminder of the lethal firepower bonds have. The source of the volatility centred on market liquidity, something investors can ill afford to ignore.
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