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Driven by Earnings 🚗

Last week, the American and Indian markets have seen similar trends.

The US markets have rallied more than 40% since the beginning of this year. Over the last 9 trading sessions, the markets went up for 9 trading sessions, its longest green streak since September 2019. And then, driven by steep post-earnings fall in Tesla and Netflix, the markets fell by 2% overnight - the biggest one-day loss since March.

Tesla reported record deliveries and revenue, but its margins dropped to a four-year low. This coupled with Elon Musk hinting towards price cuts got investors worried, resulting in a 6% fall.

Netflix added more subscribers than expected; but missed street expectations on revenue, thanks to price cuts and unfavourable foreign exchange rates, sending shares down 6%.

The Indian markets have gained 15% this financial year. The markets have been up for the last 6 sessions, and finally broke this winning streak with the Nifty falling by more than 200 points in a single day. The fall was driven by disappointing earnings reported by Infosys, Reliance Industries, and Hindustan Unilever.

  • Infosys slashed its revenue guidance to 1-3.5% from 4-7% earlier, sending the stock down by 8%. The worries extended onto the entire sector, dragging other IT heavyweights down as well

  • Reliance Industries fell by 3% ahead of its June quarter results, with expectations of a fall in both revenue and profits, thanks to weakness in the oil-to-chemicals segment

  • Hindustan Unilever declined by 2% after it reported disappointing quarterly numbers, with volume growth of a mere 3%, missing street estimates significantly

In both the US and India, the rally this year has been driven by easing inflation, and a pause in rate hikes. However, with the tremendous rise seen this year, sceptics have started becoming louder.

For the US, the worry is around the sustenance of strength, especially given the quantum and pace of rate hikes being the highest-ever. For India, while there is no questioning on growth, valuations are tilting towards the higher end of the bracket.

But in either case, with aversion kicking in, any disappointment in earnings, especially in heavyweights has resulted in sharp downfalls, dragging the markets down. With the direction of monetary policy becoming fairly clear now, the markets are expected to be swung around by earnings over the next few weeks.

stock market, finance, personal finance, infosys, reliance, hindustan unilever, usa, india

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