India’s upcoming fiscal deficit data and September factory output figures will set the tone for market sentiment this week. Meanwhile, investors are tracking Hindustan Unilever's quarterly results for signs of volume growth amid rising input costs. Globally, interest rate decisions and cloud spending guidance from US giants like Microsoft and Cognizant will influence the Indian IT sector.
Investors are keeping an eye on two key Indian economic indicators this week: the first-half fiscal deficit figures and September factory output data, both due shortly. By August, the fiscal deficit had reached 41.9% of the full-year budget estimate. While the government increased capital spending by 18.2%, revenue collection grew at a slower pace of 3.3%. This creates a risk that the total fiscal deficit could exceed the annual target of ₹16.96 trillion by nearly ₹1.4 trillion, largely driven by spending on fuel and fertilizer subsidies.
The September factory output data will serve as a pulse check for festive demand. While August showed broad-based manufacturing growth of 8%, economists anticipate a slowdown. Higher raw material costs and cooling global demand are weighing on production. Additionally, tighter credit conditions are creating hurdles for companies looking to expand their factory operations.
Hindustan Unilever’s second-quarter results are a significant event for the FMCG sector. The company has indicated that input costs for items like palm oil and crude oil have risen by 2-5% compared to the previous quarter. This puts pressure on profit margins. For investors, the most critical factor will be whether the company can maintain volume growth despite these rising costs, which would signal resilient consumer demand in a price-sensitive market.
International factors are also set to influence local markets. With US 10-year Treasury yields hovering near 5%, attention is on the US Federal Reserve and the Bank of Japan, as both are expected to keep interest rates unchanged. Indian IT investors are particularly focused on the earnings of US tech giants Microsoft and Cognizant. As major cloud and infrastructure service partners, domestic IT firms are highly sensitive to changes in these companies' AI-related spending guidance. Any significant shift in their capital spending outlook could create volatility in the Nifty IT index.