Each of the three Es (Earnings, Election and Economic outlook) of near term equity performance influenced performance last week. Cyclicals out performance can be linked to better-than-expected earnings from Financials and electoral hopes. Under performance of Consumer was led by the IMD official forecast of a below-normal monsoon and also disappointing earnings performance. In the current fundamental backdrop of low medium-term visibility, near-term drivers are likely to over-influence equity performance.
The upward momentum in indices has stabilized as expectations shift the election result (May 16th). “May” has historically been a month of higher volatility. Besides the election, monsoon and shift of earnings focus to the year ahead seem to be the fundamental reasons for the increased volatility
