When trading resumes on Monday, investors will eagerly await earnings from Reliance Industries Ltd, which is expected to post earnings growth of 31% due to high refining margins.
Because of two holidays, Indian markets missed some of the action in global markets where hopes overcame fear and facts took over from despair.
Off guard: The RBI building in New Delhi. RBI’s decision to hike the cash reserve ratio (CRR) was a dampener though the central bank’s move to combat inflation should have been widely anticipated. (Photo: Harikrishna Katragadda/Mint)
Meanwhile, better-than-expected revenue guidance by technology bellwether Infosys Technologies Ltd last Tuesday and later by HCL Technologies Ltd triggered fresh rounds of buying in battered technology stocks. And slightly lower-than-expected inflation numbers further strengthened market sentiments, helping northward momentum. Still, the Reserve Bank of India’s decision to hike the cash reserve ratio (CRR) was a dampener even if the central bank’s move to combat inflation should have been widely anticipated.
Coming back to Reliance, in view of soaring crude prices and its recent discoveries of new oil and gas reserves, the company is likely to deliver a very optimistic revenue guidance for the financial year. If that happens, it may trigger another round of buying on bourses, as sentiments would be bolstered on earnings expectation.
Other key earnings include Tata Consultancy Services Ltd, Satyam Computer Services Ltd and Axis Bank Ltd.
Important earnings later this week include Ranbaxy Laboratories Ltd, Oriental Bank of Commerce, Central Bank of India, ACC Ltd, HDFC Bank Ltd, Idea Cellular Ltd, Maruti Suzuki India Ltd, Asea Brown Boveri Ltd, Ambuja Cement Ltd, Bharti Airtel Ltd, LIC Housing Finance Ltd, ICICI Bank Ltd and Sterlite Industries (India)Ltd. So, watch for earnings to be the trigger for the week, setting the trend on the bourses.
On the global front, the situation is looking good.
Strong earnings report by companies such as Google Inc., International Business Machines Corp., Honeywell International and Caterpillar Inc., have somewhat softened the unending talk of recession in the US economy. These results have proved that their business prospects were not—at least so far—dimmed by the slowing US economy and that income from their global operations outscored analyst’s expectations by a wide margin. A rally of 20% in the stock of Google in a single day, and more than 8% gain for Caterpillar, not only helped close the main US indices with a gain of more than 4% for the week, but also propped up the sagging market sentiments across the globe. Other than Friday’s surprise earnings, results from financial services companies, such as JPMorgan Chase and Co. and Citigroup Inc., further reassured investors that the current credit crisis may have played its full hand.
Citigroup, which was in the thick of crisis, posted a $5.11 billion quarterly loss and said, it will cut another 9,000 jobs after suffering billions of dollars of write-downs tied to mortgages, other debt and a slumping economy. It gave investors a comforting feeling as they welcomed aggressive steps taken by the bank to resolve credit problems. The week will start with earnings from American Express Co., which will be keenly watched following the results of Citigroup and JPMorgan.
This week, US earnings will continue to dominate trading, as a good number of big firms such as Bank of America Corp., CME Group Inc., operator of the Chicago Mercantile Exchange and the Chicago Board of Trade, American Express, Halliburton Co., Texas Instruments Inc., 3M Co., Boeing Co., PepsiCo. Inc., Pulte Homes Inc., Ryland Group Inc. and MDC Holdings Inc. will report their earnings.
Other than the corporate earnings, this week in the US, data related to housing sector will be watched keenly as sales of both existing and new homes will be released. Sales of existing homes, due on Tuesday, are forecast to have slowed on an annualized rate, while new-home sales are expected to show some improvement. Moreover, this week, a final reading on survey of consumers will be released on Friday, while weekly jobless claims data will be released on Thursday. If the economic parameters also show some encouraging trend along with results, then the US markets may re-enter the bullish phase, which would be a very positive signal for the global markets.
Back home, results would continue to drive the markets. On a technical basis, the markets are looking strong and more gains are likely in the days to come.
On its way up, the Sensex is likely to test its first resistance at 16,564 points, which if broken, would take the Sensex to 16,810 points. This is a minor resistance level and if volumes pick up on bourses, then this level would be crossed easily and the next resistance level for the Sensex would then come at 17,228 points. This level will offer good resistance to the rising Sensex and if broken, would firmly place Sensex in bullish zone, with further resistance levels expected around 17,550, 17,767 and 18,333 points.
On its way down, the Sensex is likely to witness its first support at 16,393 points, following which, the next support will come at 15,942 points. This is a crucial support level and if broken, could take the Sensex to 15,545 points.
This week, technically, Karnataka Bank Ltd, Reliance Capital Ltd and IVRCL Infrastructure and Projects Ltd look good on charts. Karnataka Bank at its last close of Rs211.35 a share, has a short-term target of Rs224 and a stop loss of Rs201. Reliance Capital, at its last close of Rs1,350 a share, has a target of Rs1,418 and a stop loss of Rs1,308. IVRCL, at its last close, of Rs398.55 a share, may touch Rs421 with a stop loss of Rs374. From our last week’s recommendations, Bharti Airtel Ltd touched a high of Rs843 a share, which was comfortably above its target of Rs838. NTPC Ltd touched a high of Rs198 a share and met its target. While Union Bank of India Ltd fell short of its target of Rs166 a share but, it is still a valid recommendation for this week with previous week’s target and stop-loss.
Vipul Verma is a New Delhi-based independent investment adviser. Your comments, questions and reactions to this column are welcome at firstname.lastname@example.org