Stocks have reported varied trading results as attention shifted from US politics to a busy week of company earnings. Tech giants like Tesla Inc. and Alphabet Inc. are set to announce their earnings later on Tuesday.
In Europe, the Stoxx 600 Index didn’t change much, and US stock futures indicated a lower start for Wall Street. In Asia, Taiwan Semiconductor Manufacturing Co. and Samsung Electronics Co. boosted the MSCI Asia Pacific Index. The dollar and US Treasury bonds remained stable.
This week, companies that make up 29% of the S&P 500’s total market value will announce their earnings. Investors are eager to see if the recent rise in tech stocks can continue, or if it will slow down. Analysts are particularly interested in hearing more about Tesla’s robot taxi service, and they expect Alphabet’s Google Cloud revenue to benefit from advancements in artificial intelligence.
“Historically, presidential election years have been favorable for equity investors,” said Kieran Calder, head of equity research for Asia at Union Bancaire Privee in Singapore. “We think that the underlying economy and earnings picture is good for the market, and investors can be rewarded for looking past US election drama.”
However, Ajit Mishra from Religare Broking suggests that the market’s bounce back could be because investors are paying attention to the higher limit for long-term capital gains tax exemption. It has been increased from Rs 1 lakh to Rs 1.25 lakh. He thinks this change might offset the negative effects of the LTCG tax increase introduced in the Budget.
Later this week, there will be updates on the US economy and the Federal Reserve’s preferred measure of inflation.
The yen became stronger compared to the dollar as traders prepared to reduce their investment positions during the summer holiday season. Some officials from the Bank of Japan are considering raising interest rates at their July meeting, but others are concerned about weak consumer spending, which makes their decision more difficult.
The government’s decision to increase taxes on capital gains and derivatives trading has led to negative sentiment among investors, contributing to the market’s downturn.
Retail Investor Growth
Despite the market dip, the Economic Survey reported a significant increase in retail investor participation, with over 9.5 crore retail investors now holding approximately ₹36 lakh crore in stocks.
Future Outlook
Analysts caution that the current bullish sentiment in the market may make it vulnerable to corrections, especially following the government’s budget announcements and tax changes. Sitharaman emphasized that these initiatives are crucial for empowering the youth and boosting employment in the country, aligning with the government’s broader economic goals and vision for the future.
Analysts recommend that investors remain vigilant and consider the implications of these changes on their investment strategies, as the market navigates through this period of adjustment and uncertainty.
