Moneycontrol Pro Panorama | Cut out the noise, focus on data

Investors should focus on long-term drivers of stock market returns.

Dear Reader,

The Panorama newsletter is sent to Moneycontrol Pro subscribers on market days. It offers easy access to stories published on Moneycontrol Pro and gives a little extra by setting out a context or an event or trend that investors should keep track of. 

As the likely outcome of US presidential elections grips stock markets across the globe, investors would do well to cut out the noise. Instead, they should focus on long-term drivers of stock market returns—earnings and economic data.

The US stock market has performed well irrespective of the person running the country, points out this FT piece, free to read for Moneycontrol Pro subscribers. The S&P 500 delivered similar returns during Barack Obama’s and Donald Trump’s presidencies, implying limited influence of the US presidents on the long-term direction of stock markets.

Of course, stock market returns align with economic policies over the longer term. But such policy changes, if they are significant, will take time to yield results. Meanwhile, data will continue to guide the stock markets.

From this perspective, India seems to have hit a soft patch.

Interim reviews by broking firms indicate a steeper than expected slowdown in corporate earnings in the September 2024 quarter. Aggregate earnings estimates of Nifty 50 companies have been pared downwards. Earnings downgrades exceeded upgrades till now at broking firms.

The festive season and discounts helped improve automobile sales in October. But industry observers are wary of demand amid subdued sales in urban centres. “November monthly sales could see both wholesales and retails peter out unless the wedding season helps continue the momentum,” writes Vatsala Kamat in the piece on October auto sales.

The incoming data from other sectors point to tepid demand conditions. Credit growth slowed vis-à-vis the year-ago levels. According to Nomura Research, the overall retail sales at offline and online stores grew during the festive season. But the growth is notably slower than in 2023 and 2022.

Cement companies are unable to enforce their customary post-monsoon season price hikes, indicating slow recovery. Read our Chart of the Day on demand trends in cement sector. “We believe that the weakness in industrial production will reflect in GDP growth as well in Q2 FY25,” analysts at JM Financial Institutional Securities said in a note.

Other indicators such as purchasing managers indices point to healthy activity in manufacturing and services.

Still, for stock markets in India, much depends on the incremental recovery in the domestic economy and corporate earnings and not so much the outcome of the US presidential elections. “Above normal rains and weak government spending have impacted earnings outcomes (in Q2 FY25). Clear trend should emerge in the December quarter,” write analysts at Jefferies India.

Investing insights from our research team

Sagility IPO: A play on US healthcare outsourcing market

Why investors should back this NBFC amid the overall asset quality stress

Shriram Finance: Consistent growth, stable asset quality to drive valuation

CAMS: Good show in Q2, but should one buy the stock at this valuation?

Tracker 

Pro Economic Tracker: Auto registration, consumer sentiments improve, labour participation dips

What else are we reading?

Are markets headed towards procyclicality?

Why India is becoming a hotspot for steel capacity addition

IMF flags protectionism, geopolitics as downside risks to Asia-Pacific economies

New Search Engine Wars: Can Google hold on to its turf?

US Presidential election is not just about the public persona of Trump and Harris. Policies and principles matter more

Jharkhand Assembly Polls: How tribal identity issue has taken centrestage

Everybody loves a good ‘Revdi’

AI-Powered Cybersecurity: Harnessing AI for cyber defence and digital protection

Seven terror strikes in Kashmir Valley in 18 days is an attempt to undermine democratic process

Harris or Trump: America’s free-lunch economy is over

The Federal Reserve must deliver two things this week

Tech and Startups

Trump vs Harris: Where they stand on H1B visas and immigration

Markets

Near-term strategy: Book profits in high PE stocks and reinvest in value stocks, say fund managers

Technical Picks: MARKSANS, Tata Steel, KOPRAN, OIL, DR REDDY, SUPRAJIT.

R Sree Ram
Moneycontrol Pro