Q4 earnings, macro data likely to give direction to markets this week
Mumbai: The markets are likely to consolidate in the truncated week ahead. March quarter earnings season which begins this week will give direction to the markets, while investors are expected to closely watch out macroeconomic data.
“The consistent upside momentum in Nifty seems to have arrested this week and the market seems to have shifted into short term corrective phase. The present decline could continue for next week, but this correction is unlikely to damage the underlying broader uptrend of the market,” said Nagaraj Shetti, technical research analyst, HDFC Securities.
Infosys Ltd will declare fourth quarter earnings on Thursday. According to Kotak Institutional Equities, appreciation of rupee will lead to 30-40 basis points (bps) headwind that will be partly offset by cross-currency tailwind in Indian technology firms.
“With continued pricing pressure and rupee appreciation, it would be interesting to watch for the levers that Indian IT (companies) use to defend margins. We expect stable-to-marginal decline in margins and would not be surprised to see lower variable compensation payout to defend profitability. FY2018 holds promise, but we are somewhat disappointed with the pace of new projects and large deal closures. This will have a bearing on growth,” the brokerage firm said in a note on 7 April. It expects Infosys to guide for 7-9% growth in constant currency for FY2018.
Overall, higher commodity prices are likely to keep margins under pressure, while metals are expected to benefit from it in the quarter. Low base due to Reserve Bank of India’s (RBI) asset quality review (AQR) in the same quarter last fiscal year may benefit banking sector’s profitability in Q4 FY17.
On the macro-economic front, Index of Industrial Production (IIP) for February will be released on Wednesday. January factory data improved by 2.7%. Inflation data for March will also be out this week. India’s consumer price inflation (CPI) was up slightly to 3.65% in February and wholesale price index (WPI) rose 6.55% in the month.
The geopolitical tensions which intensified after the US missile strikes in Syria may have a bearing on the markets. Last week, global investors had become cautious after the attacks driving safe haven assets like crude and gold prices.