We may see volatility in the market in short term ahead of election Results & surge in US 10 year treasury yields: Lunawat
Mahavir Lunawat,
Managing Director,
Pantomath Capital Advisors
Mumbai, June 1, 2024: Amidst general elections, the primary market continues to remain vibrant, with amazing responses to certain IPOs such as Awfis Space Solutions. Confidence can be gauged by these offerings that have been launched amidst general elections, defying the earlier trend. As we speak, Kronox Lab Sciences' IPO will be launched from June 3rd to 5th.
Looking ahead, get ready for a wave of IPOs from both new-age businesses and traditional sectors. We're optimistic about the IPO post-election results. There are several factors why we believe this. First, there's been an increase in domestic capital. Then, there are improved governance practices and a thriving Indian entrepreneurship spirit, as well as supportive government policies, especially when it comes to FDI. All of these things come together to give us confidence in the market.
Indian Market update:
Indian Market witnessed profit booking after strong break out of last week ahead of general election results going to announce next week. We may see volatility in the market in short term ahead of election Results & surge in US 10 year treasury yields. As per monthly economic report of Financial Ministry for April, the industrial activity is rising and fixed investment is gathering strength on the back of elevated government capital spending that is also crowding in private investment.
Stocks belonging to sectors such as fast-moving consumer goods (FMCG), agriculture, automobiles - especially two-wheelers and tractors - retail and hotels are likely to be in focus in the next few months, as the India Meteorological Department (IMD) has forecast an above-normal monsoon. Sufficient rainfall in the June-September season can lead to faster growth and lower inflation, according to analysts. The above-normal monsoon will likely benefit sectors and companies with a presence in rural areas, as it boosts spending from the bottom and favours consumption-related sectors.
India could increase its FY25 capital expenditure outlay by 8-10% from the ₹11.11 lakh crore allocated in the vote on account when the full budget is presented thanks to better-than-expected tax revenue and a record surplus transfer by the RBI to the government. The full budget, awaited post-election results on June 4, could see a surge in spending, as per a senior official. S&P Global rating’s upgraded sovereign outlook after 10 years to “Positive” citing improved quality of public spending and expectation of broad continuity in Reforms and fiscal policies. India’s rating remains unchanged at BBB-.
Global Market Update:
US market trend remains flat to negative this week. We have seen surge in US 10 treasury yields this week to around 4.63%. “US central bank will not cut rates until there is clear evidence of sustained disinflation”. “The Federal Reserve should hold off on cutting interest rates until there is substantial progress on inflation”. These are commentaries from various FED officials came out about their views on Interest rate cut decision this week, echoing hawkish signals from FOMC members. The rhetoric of no rush to loosen monetary policy was consistent with recent statements by FOMC members and minutes from the Committee’s last policy-setting meeting. Monthly PCE data, PMI data and Second advance estimate of US Q1CY2024 GDP growth data is going to watch out in coming days to take a further clue of state of US economy.
Brent crude traded in thin range during week and trading around $83 to $84 per barrel, weighed down by growing expectations that borrowing costs could stay higher for longer, hurting the demand outlook. Investors braced for an OPEC+ meeting on 2nd June where the group is expected to keep supply cuts in place for next quarter as well to maintain price stability. Geopolitical concerns in the Middle East and Russia- Ukraine also continued to support oil prices at lower levels in short term.
