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Data released across nations during the last week led global financial markets to trade on a volatile note. The release of US jobs data fuelled expectations of an interest rate hike by the Fed. As for currency markets, the pound witnessed one of its worst times in history. The currency tanked as much as 6% in a flash crash triggered by thin liquidity. If that was not enough, the data released by the IMF prompted further concerns. The International Monetary Fund (IMF) stated the global debt has reached a record high in history, which has further heightened the risk of financial crises.
Why do we bring this up today? It is because we are set to witness a host of domestic macro data shortly.
First, we have the industrial production data for August. India's industrial production had contracted 2.4% in July. This was the worst performance in eight months. So, the release of the latest data will be a key trigger that market participants will keep an eye on. Another set of weak data on this front could hurt investor confidence and may lead to near term volatility.
Thereafter, there is the release of retail inflation data for September. In August, retail inflation had recorded a five-month low. It propelled the interest rate cut decision that the Reserve Bank of India (RBI) presented in its policy review this month. A further decline in inflation levels could again revive hopes for another interest rate cut in the coming months.
Lastly, tomorrow we will see the release of wholesale inflation data for September. Data for August showed that wholesale inflation witnessed a marginal rise. However, the annual rate of inflation for some commodities here rather remained high. Potatoes, pulses, and fruits witnessed a significant increase in prices in the month of August. Food inflation was also one of the most touted topics during the monetary policy review by the RBI.
So, these are some medium-term factors that may affect the direction of the stock markets. However, for investors it all boils down to one important question. Should there be a marked change in the way an investor goes about investing depending on the above outcomes?
Well, we don't think so. You see, making macroeconomic projections and getting the big picture right is one thing. But, to translate them into profitable stock-picking decisions is a different ball game altogether.
As Warren Buffett has rightly said, "The cemetery for seers has a huge section set aside for macro forecasters. We have in fact made few macro forecasts at Berkshire, and we have seldom seen others make them with sustained success."
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