Stock market investors will remember year 2018 as another year of wait for earnings revival as domestic triggers including introduction of long-term capital gains (LTCG) tax, fraud in Punjab National Bank (PNB), NBFC crisis, liquidity crunch and the government-RBI tussle, coupled with global factors such as Sino-US trade war, fluctuations in crude oil prices and US Federal Reserve's rate hike cycle, kept investors on tenterhooks. The S&P BSE Sensex and Nifty50 could just wrap up the year with 4 per cent and 1 per cent gains, respectively. This is against post-tax returns of at least 6 per cent offered by fixed deposits (FDs) during the year.
As curtains draws to year 2018, and year 2019 makes it way, let's take a look at five events that will set the tone for the market next year:
- General Election 2019
- Oil price trajectory
From the peak of $80 per barrel hit in early October, oil prices are now hovering at around $50 per barrel as OPEC and allies led by Russia agreed this month to cut oil production by 1.2 million barrels per day and United States granted waiver from Iran sanctions to eight countries including India. However, the upward pressure on the prices still exists as we enter 2019."We see a possibility of further restraint on Iran oil exports by the US government once the 180-day waiver period expires in early-May 2019. Iran maybe exporting about 1 mn b/d currently and any reduction may tighten the oil markets, especially around seasonally strong demand during summers. OPEC+ may consider restoring production partly or fully to address the situation," points out Kotak Institutional Equities in a research note.
- Corporate earnings
"We model net profits of the Nifty-50 Index to grow 27 per cent driven by (1) robust growth in net profits of certain banks (both private and PSUs) on the back of lower loan-loss provisions, (2) strong growth in net profits of pharmaceutical companies driven by the launch of new US generics and specialty products and (3) moderate growth across domestic consumption sectors led by moderate GDP growth.
Meanwhile, GDP growth is expected to slow down in H1FY19 after September quarter of FY19 disappointed with a broad-based slowdown across consumption, net exports and manufacturing on the supply side.
Going ahead, experts believe inflation will potentially undershoot RBI's H2FY19 average forecast of 3 per cent and will certainly remain below the 4 per cent inflation target. This raises the probability of a rate cut in the February meeting itself with experts expecting up to 50 bps of rate cut in 1HCY19.
- Global cues