On coming Monday, the market may react to sharp fall in the US markets on Friday last week due to trade war tensions and weaker-than-expected US non-farm payroll data. The Dow Jones fell 572 points or 2.3 percent.
The market extended its rally for the second consecutive week, with the Sensex rising more than 650 points amid volatility induced by the ongoing trade standoff between world’s largest economies US and China.
A lowering of CPI inflation forecast (alongwith an indication of no impending rate hike in the current fiscal), besides a prediction of higher economic (GDP) growth for current financial year 2018-19 by the Reserve Bank of India boosted market sentiment.
But Friday’s muted session after Thursday’s sharp rally indicated that investors will closely watch corporate earnings after digesting RBI policy.
The 30-share BSE Sensex rallied 2 percent or 658.29 points at 33,626.97 and the 50-share NSE Nifty rose 217.90 points or 2.15 percent to 10,331.60, taking total two consecutive weeks’ gains to 3 percent.
After this rally, the consolidation is likely to continue due to global cues, but the more upside from hereon is largely dependant upon performance of March quarter earnings that will start in the coming week, experts suggest. Infosys is the first company to kick off earnings season.
“Going ahead, the focus of the markets will shift back to earnings which are likely to kick start from next week as well as future growth outlook by the various management. Earnings growth is also likely to be supported by a low base of Q4FY17,” Teena Virmani, Vice President – Research at Kotak Securities said.
Hence, Rahul Sharma, Senior Research Analyst at Equity99, feels that over the next two months, the market will witness a lot of stock-specific movements as fund-managers will be re-balancing their portfolio to align with corporate earnings.
Overall, corporate earnings will grow in mid-teens after many years of single-digit growth. However, the markets have already factored in the earnings recovery in the current valuations, he added.
Globally, Virmani said concerns over global growth owing to trade war triggered by Trump tariff threat continued to remain. “Escalating trade standoff between US and China may continue to impact financial markets negatively.”
Especially on coming Monday, the market may react to sharp fall in the US markets on Friday last week due to trade war tensions and weaker-than-expected US non-farm payroll data. The Dow Jones fell 572 points or 2.3 percent.
Here are 10 key things to keep traders busy next week:-
Earnings
After an improvement in earnings growth for December quarter (though on a low base due to demonetisation), the Street expects growth to continue in March quarter as well. It will also give direction for earnings growth for current financial year 2018-19.
Majority of research firms expect around 5-10 percent earnings growth for March quarter and around 15-20 percent growth for FY19. They expect some tax impact on earnings, though there is strength in demand environment. On top of that, the management commentary will be closely watched.
“We expect Q4FY18 earnings to broadly mirror Q3FY18 trend of earnings improvement. While overall earnings are improving, the quality leaves much to be desired as commodities account for more than 80 percent of the profit growth,” Edelweiss said.
It expects commodities, consumer discretionary, retail lending banks & NBFCs sectors to post more than 20 percent earnings growth; domestic investment and export-oriented companies (IT, pharma, Tata Motors) to post flat growth. According to the firm, corporate lending banks & telecom sectors are expected to report losses.
Key monitorables are: a) banks’ asset quality; b) impact of commodity prices on gross margins; c) commentary on E-way bill implementation; and d) capex outlook, it said.
Emkay feels the escalation of global trade conflicts pose risk to the nascent positive spillover of the ongoing global recovery on the Indian corporate performance.
Infosys
Infosys will kick off March quarter earnings season on coming Friday. On an average, brokerage houses expect nearly 1.5 percent revenue growth in constant currency and more than 2 percent in dollar terms while margin expansion is expected be around 30-35 basis points for the quarter due to absence of wage hikes and operational efficiencies
“Guidance for FY19, Salil Parekh strategy (as he completed his first quarter in company) and long-term roadmap for Infosys, commentary on digital, client spendings and deal wins will be key monitorables,” Edelweiss Securities said.
Overall revenue growth guidance for financial year 2018-19 is expected to be around 6-8.5 percent and operating margin (EBIT) guidance is likely to be maintained at around 23-25 percent.
Trade War
Globally investors continue to watch closely the trade standoff between the world’s largest economies United States and China which has been intensified further after President Donald Trump’s reaction to more tariffs by China.
China on Wednesday announced fresh tariffs on 106 US products and on Thursday US President Donald Trump threatened more levies, asking his trade representative to consider USD 100 billion in additional tariffs against China.
China’s Commerce Ministry said Friday the country would not hesitate to react with a “major response” to the new tariffs from the US.
“Financial instability would be a result from intensification of the ongoing trade war and the unwinding of the easy monetary policy by developed nations. Higher tariffs can force the countries to devalue their currency to make their exports competitive which can have a negative effect,” Akash Jain, Vice President Equity (Research) at Ajcon Global Services said in an interview to Moneycontrol.
He believes that the ongoing trade war cannot go long as it would have serious repercussions in the respective economies. There has to be some amicable solution which would even out the worries of market participants, he said.
Macro Data
On the macro front, CPI inflation for the month of March and industrial production data for February will be released on Thursday after market hours.
CPI inflation declined to four-month low of 4.44 percent in February, from 5.07 percent in January while the index of industrial production jumped 7.5 percent in January 2018 compared with 7.1 percent in December 2017.
Foreign exchange reserves data for the week ended April 7, and deposit & bank loan growth for the last week of March will be announced on Friday after market hours. Balance of trade data for March will also be declared on Friday
Listing
Hospitality chain Lemon Tree Hotels will make stock market debut on Monday. The company in consultation with merchant bankers has fixed final issue price at Rs 56 per share.
The Rs 1,038.68 crore public issue was subscribed 1.19 times during March 26-28, 2018.
Technical Outlook
The Nifty50 closed the week above psychological 10,300-mark, showing more than 300 points recovery from recent lows.
Technical experts expect some more upside to come amid consolidation but that is unlikely to sustain for long as recent pullback from lows could be near its maturity.
“The index has formed a Doji pattern, which shows exhaustion on the upside. Formation of the pattern in the hurdle zone of 10,300-10,350 increases its bearish significance in this particular case. There are multiple parameters lying in the region to restrict further upside. Thus the pullback, which the index witnessed over last couple of weeks, could be near its maturity. Failure over here would mean the index resuming the larger downtrend in the coming week,” Gaurav Ratnaparkhi, Senior Technical Analyst, Sharekhan by BNP Paribas said.
Nagaraj Shetti, Technical Research Analyst, HDFC Securities also said the overall chart pattern and previous impact of economic events (RBI Policies) are suggesting that the upside in Nifty is limited from here.
There is a higher possibility of exhaustion of current uptrend at the highs of around 10,450-500 levels, which could eventually lead to a formation of reversal pattern at the highs and subsequent resumption of next round of declines, he added.
Ratnaparkhi feels on the downside, 10,250-10200 is a crucial support zone below which the Nifty will be set for larger decline.
F&O Outlook
On the options front, maximum Put open interest (OI) stood at 10,000 followed by 10,200 strikes while maximum Call OI was seen at 10,500 followed by 11,000 strikes.
Fresh Put writing was seen at 10,300 and 10,000 while Call writing was seen at 10,500 then 10,450 strikes. Option data suggests a trading range in between 10,200 to 10,450 zones.
“As the Nifty has already moved up 300 points, the move from here would be more of consolidative with many rangebound sessions. This is why option writing in out of money options can fetch profits in the current choppy markets. Volatility has started declining, which may lead to a decline in option premiums,” ICICIdirect said.
The highest Put base is still placed at the 10,000 strike, which is leading to this base formation while the recent pullback can extend towards 10,450, it added.
Stocks in Focus
Wipro sold 63 percent of its stake in Wipro Airport IT to Antariksh Softtech as a part of divesture of unit. The company sold stake for Rs 1.15 crore and its stake in Wipro Airport IT reduced to 11 percent post deal.
Uttam Galva Steels will react to its March quarter earnings on Monday. The company posted loss at Rs 295.4 crore for January-March quarter against profit of Rs 138.88 crore in year-ago and loss of Rs 180 crore in December quarter 2017. Income from operations dropped to Rs 63.01 crore from Rs 893.93 crore YoY and Rs 666.90 crore QoQ.
Smartlink Network Systems said the board of directors approved the buyback proposal. The company proposed to buyback up to 56 lakh equity shares at a price of Rs 120 per share and for an aggregate amount up to Rs 67.20 crore. The buyback price is 16 percent premium to Friday’s closing price of Rs 103.50 per shrae on the BSE.
Max India may be in focus as a media report indicated that Analjit Singh is in talks to buy Life’s 47.5 percent stake in Max Healthcare.
Shree Renuka Sugars’ board members decided to divest its Brazilian operations, Renuka do Brasil.
Acrysil said a meeting of the board of directors of the company will be held on April 11 to consider and approve raising long term resources for meeting the funding requirements for business, by way of preferential issue of convertible securities or otherwise, to the promoter and/or promoter group.
Prism Cement’s board of directors approved raising of funds through issue of unsecured, redeemable, listed, taxable, non-convertible debentures, tranche – X of Rs 75 crore and repurchase of Tranche IV – Series ‘B’ secured, redeemable, listed, taxable, non-convertible debentures of Rs 50 crore.
Century Plyboards’s subsidiary Century Ply Singapore Pte. Ltd. has written-off its entire investments its subsidiary P T Century Ply Indonesia. Consequently, P T Century Ply Indonesia has also ceased to be a step-down subsidiary of Century Plyboards (India) Ltd. (CPIL).
Inox Wind has won 100 MW in the SECI-4 auction maintaining its successful track record in central government auctions. The bid was won at a fixed price of Rs 2.51 per unit for 25 years. This win enhances auction based order book to a sector leading 950MW.
Nitesh Estates said it has settled the dispute in respect of the lease rights of land situated at Chennai. Under the Settlement as decreed through the arbitral award, the company will receive Rs 15 crore, as per the terms of the award.
WS Industries’ board of directors will be meeting April 10 to review the operations of the company.
Jaykay Enterprises acquired 5,45,957 equity shares (27.65 percent) of Nebula3D Services Private Ltd, a company mainly engaged in the business of 3D scanning services, 3D Design and other related services. Nebula has become an associate company.
Universal Cables said CARE Ratings revised rating on long term bank facilities to A/Stable from A-/Positive and short term bank facilities to A1 from A2+.
S Chand and Company approved the investment of up to Rs 35 lakh in Smartivity Labs that has turnover of Rs 3.93 crore as of March 2017.
Visaka Industries inaugurated its first manufacturing unit of ‘ATUM’ an integrated solar roofing system (a hybrid product) in Miryalguda, Telangana, with a production capacity of 30 MW per annum. Trial production of the same has commenced and commercial production is expected to commence from May 2018.
Optiemus Infracom said Ministry of Corporate Affairs approved the scheme of amalgamation between MPS Telecom Private Limited and Oneworld Teleservices Private Limited with the company.
Frontline Corporation has received a transportation work order from Waaree Energies Limited for Surat Branch, contract period for transportation of goods is from 01.04.2018 to 31.03.2019.
Corporate Action
Global Cues
The US Federal Reserve will publish the FOMC minutes of the March meeting. Other important data releases include PPI data for March on Tuesday, CPI inflation for March on Wednesday; JOLTs job openings for February and the Michigan consumer expectations on Friday.
Europe industrial production data for the month of February will be announced on Thursday while Japan will release its core machinery orders data for February & PPI for March on Wednesday; and foreign investments in Japanese stocks on Thursday.
China inflation data will be released on Wednesday.
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