Stock Market - India: Week a head: Main Events Feb - 2023- Week 1

Events:

There is many events lined up in the coming week including

• Union budget,
• US Federal Reserve commentary,
• Monthly auto sales numbers, and
• Corporate earnings,

all of which will give a direction to the market.

Union Budget

The Union Budget 2023 is scheduled to be presented by Finance Minister Nirmala Sitharaman on February 1. This will be critical not only for the financial markets but also for the economy, as several policy measures likely to be announced in the federal Budget will set the tone for the markets as well as several sectors.

First and foremost, this is expected to be a balanced Budget with consistent focus on the fiscal consolidation roadmap with the aim to reduce deficit to 4.5 percent by FY26 from 6.4 percent in FY23, and economic growth, experts said, adding with the likely stronger tax collections for the current financial year, the capital expenditure for FY24 is expected to be higher than in FY23.

Further, the focus by the government would largely be on infrastructure (water, railways, defence, airports, roads, etc), green energy, electric vehicles, covering more sectors for PLI schemes, hospitality, digital technology, etc, with expectations of further support to the private sector and boost to rural consumption that weakened in the recent past.

However, experts say a tweak in the tax structure for salaried employees and change in long-term capital gains (LTCG) tax and tenure are highly unlikely.

"We believe the government should increase capex by 20-25 percent with increased sectoral allocation, with focus more on the country's supply side infrastructure. Considering that this is the last Budget before the next general elections, we are also factoring in higher allocation to food subsidy, employment guarantee, and rural infrastructure," Varun Lohchab, Head of Institutional Research at HDFC Securities, said.

They don’t believe that there has been a drastic demand reduction in India due to the interest rate hike cycle, as the underlying macroeconomic numbers remain resilient. Any means to spur consumption will likely be focused on rural India, where household earnings have been relatively weak, he said.

US Federal Reserve commentary

The outcome of the two-day US Federal Reserve meeting (January 31-February 1) will be the second major event that will be keenly watched by global investors.

Given the hawkish commentary by Fed officials in the recent past, keeping inflation as a priority, though concerns of higher inflation have already eased, most experts expect another 25 basis points (bps) hike in the federal funds rate taking the range to 4.50-4.75 percent in February, and another 25 bps hike in the March meeting with the aim of bringing inflation back to 2 percent from the current level of 6.5 percent in December 2022.

The Fed is trying hard for a soft landing for the US economy and to avoid recession, while focussing on the inflation target.

Apart from that, investors will also watch out for the interest rate decision by the Bank of England (BoE) and European Central Bank (ECB) along with their commentaries.

Monthly Autosales numbers:

Monthly auto numbers are also set to be announced on February 1. Hence, all auto stocks, including Tata Motors, Maruti Suzuki, TVS Motor, Bajaj Auto, Ashok Leyland, Eicher Motors, Escorts, Hero MotoCorp and Mahindra & Mahindra will be in focus.

Most experts are positive on the sector with expectations of double-digit growth in the commercial vehicle (CV) segment, healthy order book in passenger vehicles (PV), better tractor sales and positive 2-wheeler volume growth.

In January 2023, "passenger volumes are likely to be higher on healthy order book and ramp-up in production. Further, commercial vehicles are likely to maintain their double-digit growth momentum on better freight availability," Emkay said in its report dated January 27.

In addition, the brokerage feels tractor volumes are likely to be better on improving customer sentiments and finance availability. And lastly, 2-wheeler volume growth should be positive, supported by festival season (Uttarayan) and marriage season demand.

Corporate earnings:

With the corporate earnings season gaining pace, more than 600 companies are lined up to announce quarterly numbers next week, including State Bank of India, Larsen & Toubro, ITC, HDFC, Bajaj Finserv, BPCL, GAIL, Tech Mahindra, ACC, Coal India, Indian Oil Corporation, Power Grid Corporation, Sun Pharma, UPL, Britannia Industries, Titan Company, and Divi’s Labs.

Besides, Punjab National Bank, Bank of Baroda, CSB Bank, One97 Communications (Paytm), Exide Industries, Mazagon Dock Shipbuilders, REC, Godrej Consumer Products, Indian Hotels, Jindal Steel & Power, Ashok Leyland, Jubilant FoodWorks, Tata Chemicals, Apollo Tyres, Bajaj Electricals, Dabur, Godrej Properties, Tata Consumer Products, Emami, InterGlobe Aviation, M&M Financial Services, Manappuram Finance, Marico, Tata Power, Zydus Lifesciences, MCX India, and Sun TV Network will also release their numbers next week.

So far, nearly half of Nifty50 companies have announced their quarterly earnings, which have been in line with analysts' expectations despite an uncertain global environment. While banks have posted robust results, auto, large-cap IT and FMCG companies have registered decent performance, experts said.

Global Events:

Disclaimer: I am not SEBI register analyst. Please consult your financial adviser before taking any positions.