July is turning out to be a cliff-hanger, as the direction of the markets will be determined by the outcome of some of the most crucial events during the month.

Some of the market moving events include:

  • Trump’s decision to join the Israel-Iran conflict.

  • July 9 deadline of Trump tariff.

  • FOMC meet.

  • Pharma tariff.

  • First quarter earnings.

  • Bank of Japan Policy Meet.

Trump’s decision to join the Israel-Iran conflict will increase the risk premium for global commodities, especially oil. This is expected to import inflation in economies with high dependence on imported oil. While India could absorb this inflation, given the trajectory of the inflation predicted by RBI, the future rate cut could see a pause. The street is divided on 25-50 bps additional rate cut by the end of the calendar year. 

Trump’s tariff deadline hangs over the Indian market. India and US have high delegation level negotiation on tariff, there is no clarity whether a decision will be reached by July 9 deadline. Will Trump provide another 90-day extension for a trade deal to be signed, given his administration is in active consultation with over 20 trading partners? 

The pharma tariff  is also something that will be watched out by the Indian market, with Trump threatening tariff on pharma intermediates and drugs which could impact Indian firms in the medium to long terms.

The street is pencilling hope at the next FOMC for a rate cut, but lack of clarity over tariff could delay any rate cut decision. The Bank of Japan is also holding off on interest rate hike despite rise in inflation. 

The first quarter earnings are expected to be muted. Given the recent advance tax number, corporate advance tax is seen rising by 5.9%. Which means it is estimated that corporate earnings will grow around 4.4% in the first quarter. The data shows non-corporate advance tax (by individual category and others) has degrown by 2.7% in the first quarter.