Market Week Ahead: As earnings gather steam, these 7 factors could keep investors busy
If any correction happens, then that would be an opportunity for investors who did not participate in last rally.
Sunil Shankar Matkar
After losing half a percent on the Nifty due to geopolitical tensions, subdued macro data and Infosys' earnings & guidance miss in the passing week, the market is likely to be in wait-and-watch mode for more earnings before moving in either direction (sharply), which means consolidation is likely. The Nifty ended the week gone by, at 9150.80 amid volatility while the Midcap gained 0.8 percent.
In the coming week, the market will also keep an eye on global cues, especially geopolitical issues (propped up after North Korea threatening of war and US army hit airbase in Syria) but the main focus would be on quarterly earnings.
Nifty's more than 11 percent rally year-to-date was partly on hopes of better earnings in Q4FY17 (or at least stable like last quarter-Q3). Now the Street knew that banks and metals are likely to drive Q4 earnings season, driven by hopes of early NPA resolution and rise in global metals prices, respectively.
If the earnings come on par (excluding global impact if any) then the Nifty may get a support at around 9000 level. But if earnings fail to deliver as per market expectations or FY18 outlook fails to please the Street then experts expect some correction going ahead.
If any correction happens, then that would be an opportunity for investors who did not participate in last rally because experts believe economy as well as companies' fundamentals will continue to improve going ahead.
"Going ahead in immediate term, markets will focus on the quarterly results. Valuations are high and quarterly results will need to meet or beat expectations, if markets have to sustain at current levels and move up. Management commentary on the lingering impact of demonetisation and their outlook for FY18 will be key factors to watch out for," Dipen Shah of Kotak Securities said.
Apart from earnings, he said, other events to watch out for will be the US Federal Reserve meeting in May as well as the progress on GST in India.
Jimeet Modi of SAMCO Securities said Indian markets were intoxicated with greed since last four months, any type of geopolitical disturbances can easily create fear across the board causing markets to correct. There are lot of uncertainties plus the results season on the horizon, therefore the market would not travel north in a hurry for now. Investors can wait and watch but hold on to their investments, he advised.
Reliance Securities said after a range-bound trading session during the last 2 weeks, it expects the market to break out in the coming week as lot of index heavyweights are expected to announce quarterly numbers during the next week which will be important to determine next move of headline indices.
A breakdown below 9,100 levels would see a knee jerk reaction below 9,000 levels as it breaks important averages, he feels.
Here are seven factors that will keep investors busy next week:-
Fourth quarter earnings season will be a centre point for discussion from next week onwards as it will be gathering steam. Experts already have high hope of earnings recovery from these earnings season onwards, saying corporate results will be strong from second half of FY18.
Among largecaps, TCS, HDFC Bank, Yes Bank, IndusInd Bank, Hindustan Zinc and ACC will announce their Q4 results in the coming week.
Midcap and smallcap companies like Mindtree, Network18, TV18 Broadcast, Gruh Finance, Orient Paper, HOEL, Muthoot Finance, OMAX Auto, VST Industries, Jay Bharat Maruti, RS Software, Sasken, CRISIL, Cyient, Diamond Power, Lloyd Steel, Mastek, Tata Metaliks and FAG Bearings are also set to declare quarterly earnings.
Mustafa Nadeem of Epic Research said as per open interest data the range for the market is at 9300 on higher side while 9000 - 8900 is where the activity is higher suggesting this as the next crucial support for series. But it will be crucial to see Nifty holding or breaching 9150 in next week as it is the point of inflection in near term.
A slide below that in early part of the week will signal a negative bias towards supports at 8950 - 9050. If it manages to sustain these levels then we may resume upward move but a breach of 9270 is a must for trend to continue, he feels.
According to Nagaraj Shetti of HDFC securities, the underlying trend of Nifty as per smaller and larger timeframe is weak and one may expect further weakness by next week. The expected weakness could reach down to 9050-9000 levels by next week, where one may expect emergence of buying interest from the lows.
Stewart & Mackertich Wealth Management also said the Nifty retesting downside supports of 9110 and 9050 is a possibility next week.
"Thorough technical study of the daily as well as the weekly candle patterns along with position of leading inductors suggests Nifty might get into a consolidation phase in the price range with downward bias of 9200-9050. Hence, traders and investors are advised to trade with downward bias and, wait for the technically justified level to accumulate blue chip stocks," he explains.
ICICIdirect, too, said as the market is entering the earnings season, more consolidation is expected and stock specific move is likely to beat the forefront. It expects Nifty consolidation should be seen above 9080 in the coming week.
The trade deficit in March more than doubled to a four-month high of $10.43 billion due to surge in gold imports.
Overall, imports during the month increased 45.25 percent to $39.67 billion while gold imports rose sharply to $4.17 billion (against $973.45 million in March 2016). Exports jumped to over five-year high of 27.6 percent in March to $29.23 billion, driven by petroleum and engineering sector.
RBI said services imports in February fell to $7.24 billion against $8.41 billion in previous month while services exports declined to $13.06 billion compared with $13.57 billion in January.
On the macro front, wholesale price index inflation will be announced on April 17. It increased to 6.55 percent in February from 5.25 percent in January.
Stocks in Focus
On Monday, Dr Reddy's Labs will react positively as the company said audit of its API Srikakulam Plant (SEZ), Andhra Pradesh by the US FDA, has been completed today with no observations.
However, Sun Pharma may react negatively as sources told CNBC-TV18 that the company's Dadra unit has received 11 observations after a audit by USFDA. Dadra site is the biggest unit after Halol for Sun Pharma for US supplies.
Grasim will be in focus as RBI says FIIs can now invest up to 49 percent in the company while Indian Hume Pipe will react to its order win worth Rs 177.22 crore in Bangalore.
Aarey Drugs will also be in action as it cancelled the proposal to acquire Floral Labs, the API products manufacturer having production facility at Visakhapatnam, Andhra Pradesh.
DCB Bank, Reliance Power and Bajaj Corp will react to their earnings announced after trading sessions in the passing week.
Ram Minerals stock price will adjust for bonus issue (four shares for every one share held) on April 18 while Oracle Financial will start trading ex-dividend (Rs 170 per share) from April 19.
Money flow into Equity
Domestic institutions continued to pump in money into the markets, as inflows continue unabated. However, foreign flows have turned negative over the past few days.
"We need to keep a close watch on the same, especially in the backdrop of geo-political issues as well as Trump’s comments on a strong dollar," Dipen Shah of Kotak Securities said.
FIIs were net sellers to the tune of over $250 million worth of shares while DIIs remained net buyers in Indian equities, with over USD 300 million.
ICICIdirect said, "In the F&O segment, the FII positive bias was curtailed as well. In the index futures segment, they closed long positions totalling over $330 million. At the same time, index option buying was aggressive as FIIs bought Index option worth over $800 million."
China's Q1 GDP and industrial production data for February are set to announce on Monday. US industrial production data for March is due on Tuesday while US Fed's Beige Book will release on Wednesday.On Friday, Eurozone preliminary Markit PMI Composite index as well as manufacturing & services PMI for April 2017 will be announced. Japan's manufacturing PMI is also due on same day. US manufacturing & services PMI will also release.