US Election, Q2 Earnings, Fed Meeting, and 5 Other Factors Likely to Influence Stock Markets This Week
Explore the key factors likely to impact stock markets this week, including the US election, Q2 earnings reports, the Federal Reserve meeting, and more.
Stock Markets
The Indian equity market wrapped up Friday with a 0.5% weekly gain, buoyed by advances in banking, financial, and metal stocks. As markets reopen on Monday, a mix of domestic and international events—such as Q2 earnings reports, the US election, and global market trends—are expected to influence market movements.
On Friday, during a special Diwali "muhurat" trading session, the Nifty 50 and BSE Sensex increased by 0.41% and 0.42%, respectively, with auto stocks leading the charge due to strong monthly sales data. The domestic market showed positive signs of reversal this week, supported by festive sentiment, steady institutional inflows, and falling oil prices. Additionally, easing geopolitical tensions and improved India-China relations boosted market sentiment.
Q2 Earnings on the Horizon
Investors are set to closely monitor the upcoming Q2FY25 earnings reports this week from companies including Titan, Power Grid Corporation, Tata Steel, Lupin, Mahindra & Mahindra, Trent, LIC, Tata Motors, Asian Paints, Divi's Laboratories, and SBI. Analysts anticipate mixed results, with some sectors expected to perform strongly while others may face challenges. The market's response will depend on how these results align with broader economic indicators.
Impact of the US Election
The United States presidential election on November 5 features a tight race between Democratic Vice President Kamala Harris and Republican former President Donald Trump, according to recent polls. Analysts suggest that the election outcome could have economic implications for various sectors of the Indian economy, influenced by the differing policies of the candidates.
A Harris victory could lead to a more accommodative stance from the U.S. Federal Reserve, potentially prompting the Reserve Bank of India (RBI) to lower rates. This change could benefit Indian non-banking financial companies (NBFCs) by reducing funding costs and stimulating loan demand.
Conversely, a win for Trump might maintain higher U.S. interest rates, putting pressure on the RBI to keep rates elevated and delaying any potential cuts. This scenario may favour public sector banks (PSBs) over NBFCs in India.
Federal Reserve Meeting Outlook
The outcome of the U.S. Federal Reserve’s policy meeting on November 7, following the election, is anticipated to significantly affect Indian equity markets. A potential rate cut by the Fed could lead the RBI to consider easing rates, positively impacting sentiment in Indian equities.
Analysts expect the Fed may implement a quarter-percentage-point rate reduction, which could enhance foreign investment inflows into India and bolster market performance.
Auto Sales Insights
October auto sales data has shed light on consumer demand during the festive season. Maruti Suzuki reported record sales of 206,434 units, reflecting a 4% year-on-year increase. Mahindra & Mahindra and Hyundai also posted strong figures, indicating robust demand in the sector, although Tata Motors saw a decline. This strong domestic demand is likely to support auto stock performance in the coming week.
FII Trends
In October, foreign portfolio investors (FPIs) experienced a record outflow of ₹1,13,858 crore from the Indian secondary markets, contributing to recent market declines. However, FPIs continued to invest in the primary market, putting in ₹19,842 crore. High valuations in secondary markets have led FPIs to favour primary market investments with fairer valuations. Persistent selling pressure could hinder upward market movements.
Global Market Overview
Global indices rallied on Friday, spurred by Amazon's strong quarterly performance and investor caution ahead of the U.S. election. The Dow gained 0.69%, the S&P 500 rose 0.41%, and the Nasdaq climbed 0.80%. European stocks also saw gains, with the STOXX 600 index advancing 1.09%, largely driven by banking shares. Positive sentiment in global markets often influences Indian markets, particularly through foreign investments.
Crude Oil Developments
Oil prices continued their upward trend amid reports of Iran preparing a retaliatory strike on Israel from Iraqi territory. The ongoing conflicts in the Middle East, particularly stemming from tensions in Gaza, have led to fluctuations in oil prices. On Friday, Brent futures rose by 29 cents to settle at $73.10 a barrel, while U.S. West Texas Intermediate (WTI) crude increased by 23 cents to settle at $69.49.
U.S. Treasury Yields
U.S. Treasury yields climbed following a modest October jobs report, with benchmark 10-year yields reaching 4.36%. Higher yields often attract capital flows to the U.S., potentially resulting in outflows from emerging markets like India. However, if U.S. economic data suggests stability, Indian equities may see a moderate return on foreign investor interest.
