Last week ended on a slightly sour note with the Infosys episode, but this week is a big one for earnings starting off with Reliance and Axis Bank today. We are in the thick of earnings with the markets having gone on a bit of a consolidation groove between 5,600 and 5,800.
Global markets too are doing pretty much the same thing as they reflect earnings in their respective markets. It looks like this week will start on a flat note and then respond as the earnings come in, said Udayan Mukherjee, managing editor, CNBC-TV18.
There are lots of earnings this week. It is an unusually packed calendar for the first week of earnings season. Today, we have Reliance and Axis Bank and lot more numbers over the next couple of days. Given that global markets are also pausing, every indication is that we will have a range bound situation. Like Friday, we will see individual reactions, which are fairly sharp, but that may not move the needle of the market too significantly beyond the range that we got stuck into.
For the next couple of weeks it becomes a stock specific market. Unless global markets breakdown from their consolidation pattern, it is unlikely that we will see a major move by major more than 3-4 percent on either side. It is that time of the year where you start focusing on individual stocks again and see whether the secular kind of move that you have seen in the last one month or so is reflected by some of these earnings fundamentals.
Markets are grinding through earning season in the US as well. Earnings have not started off very well. First it was the technology disappointments and now even the financials like JPM are not reporting great numbers but it is early days yet. The good thing about global markets is that they have not broken down.
Despite the corrective mood of the last couple of weeks, the S&P is still at 1,430 which is not a very bad level. You are drifting down; maybe it is more like a consolidation kind of phase without a major correction having ensued. The fear when we entered October was that global markets have had a great four months run and we will see a meaningful correction in global markets that has not happened yet.
We are just grinding and just factoring in some of the bad news. We will have to see over the next couple of weeks whether this consolidation takes on a pattern of a deeper correction in which case that has ramifications for the Nifty. Otherwise, all markets might just hold a bit of a trading range and get through this earning season.
There is no great clarity on where we are headed. We have gone to that 5,600 level on the Nifty a couple of times 5,620-5,630, but we have not broken down below 5,600, so that is emerging as a strong port of support. On the way up, there have been weak attempts a couple of times to stay above 5,700 that also has not fructified, the market goes there and keeps coming back.
For now, unless some major surprise happens on earnings from Reliance etc, 5,820 top seems like the near-term top for the market atleast for now and 5,600 seems like a reasonable support. Maybe we spend some more time in this 200 point range, which I think after the kind of rally that we saw in September is a very reasonable kind of outcome for the market. It is not a bad outcome at all that the market consolidates some of its recent gains in the upper quartile of the trading range now. We will probably see more of the same.
The fact is that flows have ebbed off just a little bit. We are not seeing that kind of big flows coming in. Particularly, in the futures market there are some signs of long unwinding going on for the last two-three sessions. That is robbing the market of a little bit of momentum.
Infosys certainly on the margin has not helped, but the picture could change this week if we get a couple of earnings surprises. The moment the market starts closing above 5,700, people will start talking about retest of the recent top. But pending that I think there is so much newsflow coming in now, I guess 5,600-5,800 is probably the more acceptable or predictable trading range for the index.
Meanwhile the September inflation data is also predictable, you will get 7.7 percent kind of number and that is pretty much what the street knows. Inflation number is going to be important and coming as it does two weeks before in important monetary policy meeting, it certainly is a far more important number than the IIP number. Having said that, the finance minister from Tokyo has been saying that we have done something, will the Reserve Bank of India (RBI) also respond.
Maybe the RBI will do something like that, after a long time there has been some steps towards fiscal adjustment, it is not a huge fiscal plan, but atleast a first step has been taken. Maybe the RBI decides to cut rates or atleast cut CRR on the 30th and leave a little bit for the government that you have done something, do some more and we will respond. That kind of an approach is possible. The market will keep hopes on till 30th of some kind of a cut if not a repo then a CRR cut even if the inflation number today comes in at 7.7 percent.