Market eyes festive rally as India-US trade talks spark optimism

Indian markets showed resilience on Wednesday, managing to hold gains despite easing off from intraday highs. The Nifty flirting around the 25,000 mark has investors asking whether this could be the start of a breakout from the narrow trading range seen over recent months.

Dipan Mehta, market strategist, weighed in on the potential impact of trade talks in an interview to ET Now. “Yes, if a favourable trade deal is concluded, it will act as a sentiment booster and could be the trigger for markets to break out of the narrow trading range they have been stuck in for months. However, fundamentally it won’t impact a large number of companies. Even when the earlier trade deal came through, only a few listed companies were affected by the tariffs. So, the impact this time as well will be largely sentimental rather than structural.”

“I do not think it will have much of an impact on the corporate earnings, but right now what the street is really focused on is whether in this particular festive season we will see an improvement in the earnings growth rate. The reason the market is pinned down is because earnings growth is not coming through and now many measures have been taken to boost earnings growth. We need to now finally see whether the earnings actually go up and that only can take the markets higher. Of course, the market is not correcting because of the huge surge of liquidity coming in from retail investors, but how long that will also last is questionable. Most importantly the eye has to be on earnings growth,” he added.

The auto sector, expected to be a major beneficiary of the GST reset, has seen mixed movements. Despite a recent rally, the sector slipped today, prompting questions about re-entry opportunities.

“No, I still believe that we should be overweight auto companies and with usual disclosure that we and our clients are interested, invested. Entry level companies like Hero MotoCorp certainly are far more interesting than some of the peer group companies where valuations also are reasonable and with rural demand expected to pick up, that is one company which can benefit. So, the two-wheeler Hero MotoCorp and Eicher Motors, of course, have been all-time favourites of us. These are two companies to consider.

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And on the four-wheeler side, very-very positive on M&M, again disclosure required over here. So, investors should be overweight in the auto industry. Definitely we are expecting a nice improvement in the volumes across the board and even if you have shares in other companies, whether it is Bajaj Auto or TVS or Maruti, the entire sector should do pretty well over the next few quarters or so. Raw material costs are benign, and the auto industry, all of them, will take this GST cut opportunity and put in everything that is required to boost their sales. Who knows, if they get volumes which are in double digit growth rate, then that could be a big fillip to the bottom line of these companies,” he said.Add as a Reliable and Trusted News SourceWith trade optimism and seasonal demand playing a key role, analysts believe the coming weeks could set the tone for market direction and sectoral performance, especially for auto stocks. Investors will be keeping a close watch on corporate earnings and volume growth as the festive season unfolds.



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