Purchasing Managers Index, Budget, Corporate Earnings Announcement and Non-Financial events

Purchasing Managers Index (PMI)

The Purchasing Managers’ index (PMI) is an economic indicator that tracks the activity of manufacturing and service sectors across the country. It is based on a survey of purchasing managers, who report on their perception of change from the prior month. The consolidated index incorporates data from new orders, output, expectations, and employment.

The PMI number is typically around the 50 benchmarks. Anything above this level would indicate an economic expansion, while anything below could point to contraction. A reading of exactly 50 would signify no change.

Budget

During the budget, the Ministry of Finance goes over the economic state of the country with a fine-toothed comb. The Finance Minister then makes his budget speech to all citizens, unveiling major government policy changes and economic reforms. This has far-reaching consequences as they affect a variety of industries and markets. This event obviously has great significance in regard to the economy.

In recent budgets, the Finance Minister has raised duties on cigarettes, resulting in higher prices. This has a few implications, such as:

1. The rising cost of cigarettes could put off smokers from purchasing them (which is of course, open to debate), therefore potentially decreasing profits for cigarette manufacturers such as ITC. This may then cause investors to sell their shares in the company.
2. If traders start unloading their stakes in ITC, the markets will be impacted heavily due to their hefty weight in indices.

A budget is typically unveiled once a year, usually during the last week of February. However, due to extraordinary situations, such as the formation of a new government, it may be delayed.

Corporate Earnings Announcement

The stocks react strongly to the corporate earning season. The listed companies must release their quarterly earnings figures every three months. When these numbers are declared, corporations provide details regarding various operational activities, for example:

– Revenue growth

– Expense trend

– Finance charges

– Profitability trends

– Project updates

– Key trends in the industry

Apart from that, businesses can provide a preview of what’s to come in future quarters. This prediction is labelled ‘corporate guidance.’

Invariably, Infosys Limited is the first blue-chip company to announce each quarter. Their guidance is closely followed by market participants, given its influence on the markets.

This table provides an overview of the Indian earning season. It gives an insight into the current financial situation.

In India, April 1st marks the commencement of the financial year. In comparison, the US has their fiscal calendar start on January 1st, with the first quarter then covering January to March.

Every quarter when the company declares its earnings, market participants compare this to their ‘street expectation’. This is the amount they expect the company to have earned.

The stock price will likely move in response to whether or not the company’s earnings meet the street expectations. If it is higher than expected, then the price should increase; if lower than expected, then it could see a downturn.

If the street expectations and actual numbers are in agreement, more often than not, the stock price will trade at a lower rate. This is due to there being no positive surprises from the company.

Non Financial events

Apart from the mentioned events, it would be wise to consider other non-financial events and their effects on markets. A stark example of this is the Covid pandemic in 2020, which had a huge impact on economies all over the globe, disrupting regular economic activities. 

The global supply chain was greatly affected due to the sudden inflation spike. Yet, amidst all this, there were few industries that couldn’t have been happier; mainly online services was one such sector that benefited immensely.

The tensions between China and Taiwan, as well as the Russia – Ukraine war, have had repercussions on world markets. Their effects reach beyond the borders of these countries and have ramifications for numerous economies that are connected with them. 

Consider the price of natural gas and crude oil in Europe, which is impacted by disruptions to the Russian transportation of these resources due to the ongoing conflict.

As an active trader or participant in the market, you should keep an eye out for these events and comprehend how they can affect the markets.

The global economies are closely intertwined, but single events in particular countries can affect their local economy. To give an example, the electoral developments in India will only impact its economy.

Be sure to pay attention to non-monetary occurrences and their potential effect on either the share markets or particular trades.