Economic Roundup, January 11, 2019

Economic Environment

  • Global growth and corporate earnings

How are the Indian and global economic environments affecting the financial markets?

  • The markets continue to focus on global growth and corporate earnings. As the 2018 Fourth Quarter corporate earnings releases begin, US earnings are thus far not encouraging potentially signaling a slowdown but there are still many companies that are yet to report. Indian economy, however, has strong fundamentals while the rest of the world economy appears to potentially experience a slowdown in 2019 including the US economy though the United States may not enter a recession. Global economic concerns and political risk in relation to the upcoming parliamentary general elections in India in 2019 will continue to affect the Indian financial markets through the first two quarters of calendar year 2019.

    What to expect from the markets next week?

Continued range-bound and flat behavior can be expected in the coming week. It must be noted that beginning next week corporate earnings reports could determine whether the major Indian indices will formally enter correction territory because both BSE SENSEX and NSE NIFTY 50 are already hovering close to 10 percent decline from their 52-week highs. Tata Consultancy Services (TCS) has reported solid growth in the last quarter of the 2018 calendar year but it is yet to be seen if this is an anomaly or a trend in the technology sector and in earnings as a whole for all the reporting companies. If it is a trend, it is encouraging for the Indian economy because it could bring the major stock indices out of being close to correction territory and also portend solid gross domestic product (GDP) growth.

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