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Essence of the Week
Aug 14, 2017 | Source: AxisDirect
So far into the earnings season, performance has been lackluster. Earnings growth for 112 companies (ex OMCs) within our coverage universe at just 2% YoY is 450 bps below expectations. However, markets are willing to look through this quarter’s performance since weak growth was largely anticipated due to GST implementation.
While we do see a recovery in the current quarter, the pain of the quarter gone by will still pull down full year earnings estimates.
Apart from company performance, what will keep markets volatile is concern around geopolitics. For instance, the US dollar index began to gain strength on good earnings, but got nipped by US President Trump’s “fire and fury” statement.
The last time when geopolitical tensions rose, we noted that data showed dozens of ongoing conflicts around the world, any of which could escalate. This time, we may see few tensions rising… US-Russia sanctions, US-North Korea jawboning, Iran-Saudi Arabia proxy wars, and the India-China stand-off at Dhoklam.
Global markets risk perception has picked up sharply in the last few days after remaining low for an extended period of time. Historical evidence suggests market corrections in these situations are ideal opportunities to pick quality stocks.
Watch out for
July CPI (14 August) – will it be below or above 2%
RBI MPC minutes (16 August) – rationale for rate cut & forward thinking
RBI annual report (end August) – for details on currency management
Q1FY18 GDP result (end August)
Global Markets
Macro Economy
Essence of the Week
Geopolitics
Global Economy