Moneycontrol
Jan 13, 2018 06:36 PM IST | Source: Moneycontrol.com

Week Ahead: Earnings, IPOs & Infosys Q3 result to drive markets next week

Going forward, the market will watch for cues from the earnings front, as over 100 companies will declare results. Along with this, two new IPOs will hit the market as well. Stocks such as Infosys, IDFC Bank, and Capital First will be in focus on the back of corporate developments.

Uttaresh Venkateshwaran @UttareshV

A recovery in late trade helped the market end the January 8-12 week at a fresh record closing high. The rally was supported by index heavyweights like ICICI Bank, Reliance Industries and HDFC. In fact, 2018 has begun on a strong note as benchmark indices ended both weeks at record closing highs.

December quarter earnings, so far, have been positive. Infosys, TCS and IndusInd Bank numbers were largely in line with street estimates, while Karnataka Bank posted a strong Q3 with an improvement in asset quality.

The market fell nearly half a percent intraday on Friday after four Supreme Court judges raised concerns over its administration but that petered out soon.

The 30-share BSE Sensex ended the week at 34,592.39, up 88.90 points. The 50-share NSE Nifty gained 30.10 points to close at 10,681.30. For the week, the Sensex gained 1.3 percent and Nifty rose 1.15 percent despite Brent crude futures hitting a USD 70 a barrel high.

Going forward, the market will watch for cues from the earnings front as over 100 companies will declare results. Two new IPOs will also hit the market. Stocks such as Infosys, IDFC Bank and Capital First will be in focus on the back of corporate developments.

Over 100 BSE companies will declare earnings

As the street settles into the earnings season, it will look for cues from major companies’ December quarter results.

Delta Corp, Federal Bank, Den Networks, ICICI Lombard, Reliance Nippon, SH Kelkar, Adani Power, Adani Transmission, HUL, Bharti Infratel, Yes Bank, HDFC Bank, HDFC Standard Life, ICICI Prudential, ITC, Kotak Mahindra Bank, Jubilant Foodworks and Wipro will be among the prominent companies declaring their results.

Macro data

Investors will be taking cues from the crucial economic data that was released later on Friday. While IIP is at a multi-year high, inflation too has soared.

Industrial output hit a 25-month high in November, soaring 8.4 percent, led by robust growth in manufacturing as well as inventory rebuilding post the festive season.

Meanwhile, retail inflation, measured by Consumer Price Index (CPI), hit a 17-month high, growing 5.2 percent in December, due to hardening housing, fuel and food prices. In November, it  hit a 15-month high at 4.88 percent. What may worry the street is the inflation number inching towards RBI’s upper tolerance level at 6 percent.

The government will declare wholesale price inflation (WPI) data later next week.

IPO

Two new IPOs will be hitting the primary market in a bid to raise funds. Appliance maker Amber Enterprises India will open its Rs 600-crore initial public offering on January 17, with a price band of Rs 855-859 per share.

The public issue comprises a fresh issue of equity shares aggregating up to Rs 475 crore and an offer for sale of up to Rs 125 crore by promoters Jasbir Singh aggregating up to Rs 62.5 crore and Daljit Singh up to Rs 62.5 crore. The issue will close on January 19. The anchor investor offer period will be one working day prior to the bid opening date: January 16.

Meanwhile, IT firm Newgen Software Technologies is planning to raise around Rs 450 crore through its initial public offer. The issue will open on January 16 and close on January 18.

Telecom stocks

Telecom stocks could be in focus next week as companies declare their financial results and react to the cut in international interconnect usage charge (IUC). The telecom regulator on Friday reduced charges to 30 paise per minute from 53 paise per minute. Idea Cellular and Bharti Airtel stocks could be in focus due to the cut in international IUC.

Experts are also foreseeing a weak quarter. For the December quarter, brokerages expect incumbents to report a weak quarter and the slashed IUC is set to further dent their numbers.

Infosys

Investors will react to index heavyweight Infosys' December quarter performance. The company reported a whopping 37.6 percent growth in Q3 profit, with retaining its full-year revenue guidance.

Profit, which was largely driven by a tax reversal, stood at Rs 5,129 crore against Rs 3,726 crore in the previous quarter. It has maintained its full year constant currency and dollar revenue  growth guidance at 5.5-6.5 percent and 6.5-7.5 percent, respectively. EBIT margin forecast has been retained at 23-25 percent for FY18.

Corporate Action

Few companies will be holding their annual general meetings while at some  there will be discussions on a share buyback.

Urja, Goa Carbon, GAIL and Shree Cements will be on investors' radar as these companies are set to announce an interim dividend. While SJVN, Aarti Drugs and Orbit Exports will be having their AGMs between January 17 and 18, 2018 to discuss their buyback offer.

Stocks in focus

Zenith Birla: Suresh Mitbaokar and Rasika Kadam have resigned as directors of the company.

Granules India: Increase in FPIs investment limit to 49% from 24%.

Infosys: Net profit up 37.7 percent on lower tax expenses.

ONGC: Chopper flying from Mumbai to an oil rig at Mumbai high crashed; 4 bodies recovered.

HDFC: The Board has approved raising Rs 11,301 crore by issuing 6.43 crore shares at Rs 1,726.05 per share to investors.

IDFC Bank-Capital First merger

The market could possibly react to a merger deal between IDFC Bank and Capital First on Monday.

IDFC Bank announced its merger with non-banking financial company Capital First on Saturday. The share swap ratio has been fixed at 139:10, which means 139 shares of IDFC Bank will be allotted for every 10 equity shares of Capital First.

V Vaidyanathan, currently Chairman and MD of Capital First, will succeed Rajiv Lall as MD and CEO of the combined entity upon completion of the merger process.

As part of the arrangement, Bipin Gemani, the CFO of IDFC, has resigned from his position and will now be interim CFO of IDFC Bank.

In a statement to the exchanges, IDFC Bank said this announcement is pursuant to its stated strategy of ‘retailising’ its business and to complete its transformation from a dedicated infrastructure financier to a well-diversified universal bank. Capital First said the deal is inline with its stated intention and strategy to convert to a universal bank.

Global cues

Markets in US will be shut on Monday on account of Martin Luther King Day.

In economic cues, Europe and Japan will be declaring CPI and core machinery data, respectively. China will release its GDP figures and the US its housing data.

Technical Factors

January 8-12 week was a roller-coaster ride for investors, but late buying by the bulls pushed the index to a record closing high on the Nifty. This resulted in a ‘Dragonfly Doji’ type pattern on the daily candlestick chart. On the weekly charts, the index has formed a bullish candle.

On the options front, maximum Put open interest was seen at 10,500 followed by 10,600 strikes. Maximum Call OI was seen at 11,000 followed by 10,700 strikes.

Fresh and significant Put writing was seen at 10,700 and 10,600 strikes while Call writing is seen at 10,750 and 10,700 strikes.

Going forward, experts recommend treading with caution. “Though the Nifty is heading up and forming higher highs, the momentum oscillators are indicating weak strength at the highs. This index discrepancy and oscillators could be an early warning signal for bulls at higher levels. It also warrants placing of protective stop loss for trading long positions or regular profit bookings at highs,” HDFC Securities said in a report.
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