US election, Q2 earnings, Fed meet and 5 more factors to likely impact stock markets this week

On Friday, the Nifty 50 and BSE Sensex rose by 0.41% and 0.42%, respectively, during a special Diwali “muhurat” trading session. Auto stocks led this upward move, bolstered by strong monthly sales data. “The domestic market showed positive reversal signs this week, aided by festive sentiment, steady institutional inflows, and declining oil prices,” said Vinod Nair, Head of Research at Geojit Financial Services. Market sentiment was also uplifted by easing geopolitical tensions and positive India-China relations.

Q2 Earnings
Investors will closely watch corporate earnings as the next batch of Q2FY25 results to be released this week. Companies including Titan, Power Grid Corporation, Tata Steel, Lupin, Mahindra & Mahindra, Trent, LIC, Tata Motors, Asian Paints, Divi’s Laboratories, and SBI will be in focus. Analysts expect mixed results, with some sectors performing robustly while others may face challenges. The market’s reaction will likely hinge on how these earnings align with broader economic signals.

Outcome of US election
The United States presidential election on November 5 has Democratic Vice President Kamala Harris and Republican former President Donald Trump in a close contest, according to recent polls. Analysts suggest that the outcome will have economic ripple effects on various sectors of the Indian economy, driven by the differing policy approaches of the two candidates.

An analysis by JM Financial suggests that a victory for Harris could lead to a more accommodative stance from the U.S. Federal Reserve, potentially prompting the Reserve Bank of India (RBI) to ease rates domestically. This shift would benefit Indian non-banking financial companies (NBFCs) by lowering funding costs and stimulating loan demand.

In contrast, a win for Trump may keep U.S. interest rates elevated, pressuring the RBI to maintain higher rates and delaying any potential rate cuts. This scenario would slightly favor public sector banks (PSBs) over NBFCs in India.Fed meeting outcome
The U.S. Federal Reserve’s policy meeting on November 7, following the November 5 presidential election, is expected to impact Indian equity markets significantly. A Fed rate cut could influence the Reserve Bank of India (RBI) to consider easing rates, boosting sentiment in Indian equities.Analysts predict the Fed may opt for a quarter-percentage-point rate reduction, potentially driving foreign investment inflows to India and enhancing equity market performance.

Auto Monthly Sales Data
October auto sales data offered insights into consumer demand during the festive season. Maruti Suzuki reported record-breaking sales of 2,06,434 units, marking a 4% year-on-year increase. Mahindra & Mahindra and Hyundai also posted strong numbers, with M&M leading among domestic players. These figures reflect strong demand resilience, providing a positive outlook for the auto sector, though Tata Motors saw a dip in sales. Robust domestic demand could support auto stock performance in the coming week.

FII Trends
October saw a record Rs 1,13,858 crore outflow from foreign portfolio investors (FPIs) in the Indian secondary markets, contributing to the market’s recent decline. However, FPIs continued to buy in the primary market, investing Rs 19,842 crore. “High valuations in secondary markets have led FPIs to prefer primary market investments at fairer valuations,” noted Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services. If selling pressure persists, it could restrict upward market movements.

Global Markets
Global indices rallied on Friday, driven by Amazon’s robust quarterly performance and investor caution ahead of the US election. In the US, the Dow gained 0.69%, the S&P 500 rose 0.41%, and the Nasdaq climbed 0.80%. European stocks also saw a recovery, with the STOXX 600 index advancing 1.09%, driven by gains in banking shares. Positive global market sentiment often spills over into Indian markets, particularly through foreign investments.

Crude Oil
Oil extended its recent rally on reports that Iran was preparing a retaliatory strike on Israel from Iraqi territory in the coming days.

Iran and Israel have engaged in a series of strikes within the broader Middle East warfare set off by fighting in Gaza. Previous Iranian air attacks on Israel on Oct. 1 and in April were mostly repelled, with only minor damage.

On Friday, Brent futures gained 29 cents to settle at $73.10 a barrel, while U.S. West Texas Intermediate (WTI) crude rose 23 cents to settle at $69.49.

US Treasury Yields
US Treasury yields rose after a mild October jobs report, with benchmark 10-year yields reaching 4.36%. Higher yields often drive capital flows toward the US, creating potential outflows from emerging markets like India. However, if US economic data signals stability, Indian equities may see moderate foreign investor interest return.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)