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Earnings to guide market trend

Earnings to guide market trend
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First Published: Sun, Apr 17 2011. 09 09 PM IST

Shyamal Banerjee/Mint
Shyamal Banerjee/Mint
Updated: Sun, Apr 17 2011. 09 09 PM IST
Much on expected lines, markets moved in a range but saw a lot of volatility on alternate bouts of buying and selling by funds and traders. As expected, the week started on weak notes, but markets saw strong rally during the middle of the week mainly on bargain hunting by funds tracking fall in international crude prices. However, disappointment over Infosys’s earnings and revenue guidance pushed the markets lower again on Friday.
Shyamal Banerjee/Mint
Amid all the roller coaster ride on bourses, one thing emerged clearly: that the undertone of the market continues to remain positive and foreign fund’s appetite for Indian stocks still remains high, though there was no change in the outlook of the Indian economy as all basic parameters remain unchanged.
Inflation remains a concern and high rates of interest are a serious threat to growth, especially as the markets are expecting another rate hike in the forthcoming meeting of the Reserve Bank of India in May. But the underlying growth momentum in the economy still makes the trend on Indian stock market positive.
Globally, the trend remained range-bound, though major global bourses ended the week lower. Russia was the top loser with a fall of over 4% in its benchmark index, followed by Brazil, France, Japan, Hong Kong and India. Interestingly, China posted moderate gains over the week, despite the looming threat of inflation.
The earnings season in the US also started on weak notes as Alcoa Inc. reported weaker than expected revenue, which triggered some fall on bourses. Later, Bank of America Merrill Lynch and Google Inc. also disappointed with their earnings. However, overall economic data in the US remained good despite weekly jobless claims rising over the week. Consumer price inflation remained contained in March while industrial production increased. A separate survey showed improvement in consumer sentiment in April. So the buoyancy in US economic indicators more than made up for weaker earnings, keeping positive sentiments alive.
The earnings season would continue to dominate the market movement this week as some big names like HDFC Bank Ltd, IFCI Ltd, GlaxoSmithKline Consumer Healthcare Ltd, ACC Ltd, HCL Technologies Ltd, Jindal Steel and Power Ltd, Tata Consultancy Services Ltd and AXIS Bank Ltd, etc. would release their earnings this week. Apart from earnings, the first detailed forecast of the monsoon season would be closely watched on 19 April, which is likely to influence sentiments.
This week will again be a shortened week due to a holiday on Friday. The earnings calendar in the US will be busy with top technology and financial company results due this week, which includes Yahoo Inc., Intel Corp., International Business Machines Corp., Texas Instruments Inc., Goldman Sachs Group, Inc. and Citigroup Inc.. This blitz of numbers will come during a holiday-shortened week as US financial markets will be closed on 22 April to observe Good Friday.
Technically, Indian markets are likely to trade range-bound with a positive bias. The S&P CNX Nifty index on the National Stock Exchange has a trading range between 5,929 and 5,712 points, with the index currently at 5,824.55. A breakout on either side would be the trend for the week.
On its way up, the first resistance for Nifty would come at 5,852, but this being a moderate resistance, it will not pose any significant threat to the northward momentum. If this level goes, the next logical resistance would be the upper end of the trading band of Nifty, which would be at 5,929 points. This level would decide the short-term outlook as a breakout above this with good volumes or a comfortable close above this would push the Nifty above 6,000 as next resistance level would be 6,021. However, there would be a strong resistance at 6,112, where the markets are likely to face some selling pressure. On its way down, the Nifty would test its first support at 5,748, but this being a moderate support, it may not withstand any volume-driven fall. However, there is a strong support at 5,712, which is likely to attract good support followed by consolidation. However, if this level goes, the Nifty would find its next good support at 5,648 points, which is likely to be strong.
Among individual stocks this week, Reliance Infrastructure Ltd, Grasim Industries Ltd and Shree Renuka Sugars Ltd look good on charts. Reliance Infra, at its last close of Rs 686.95 has a target of Rs 704, and a stop-loss of Rs 763. Grasim, at its last close of Rs 2,521.85, has a target of Rs 2,578 and a stop-loss of Rs 2,468, while Shree Renuka, at its last close of Rs 74.90, has a target of Rs 79 and a stop-loss of Rs 70.
Vipul Verma is chief executive officer, Moneyvistas.com. Comments, questions and reactions to this column are welcome at ticker@livemint.com
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First Published: Sun, Apr 17 2011. 09 09 PM IST