Markets week ahead: Can major IT earnings bring bulls back on markets?

During this week, markets will keep a close watch on corporate results for the second quarter of FY23 with TCS, Wipro, HCL Tech, and Infosys in focus. Broadly, IT stocks will be in focus due to quarterly earnings. Globally, FOMC minutes are likely to hold dominance in fuelling market sentiment. While inflation print of major economies like the US, China, and India will also have a role in the performance. Domestic equities will also track the movement of global peers. Last week, both Sensex and Nifty 50 climbed by more than 3% each. Sensex is currently shy of the 58,200 mark and Nifty 50 is near 17,315 level.

Last week, on Friday, Sensex closed at 58,191.29 down by 30.81 points or 0.05%. While Nifty 50 ended at 17,314.65 below 17.15 points or 0.1%. Tata Group’s Titan outperformed, while Power Grid, IndusInd Bank, NTPC, and Maruti Suzuki were among the top gainers. Stocks like M&M, Ultratech Cement, SBI, and TCS were top laggards. In terms of sectoral indices, consumer durables stocks outrun their counterparts, while metal, oil & gas, and IT stocks were among the top bears. Overall, the markets witnessed a lackluster demand for equities.

Meanwhile, the Indian rupee slipped to a fresh record low of 82.43 against the US dollar on Friday before finally settling at 82.30 per dollar.

On the other hand, after being net buyers for the third consecutive day last week, FIIs carried an outflow of 2,250.77 crore in the markets on October 7. This week, FIIs made a buying of 279.01 crore on October 6, 1,344.63 crore on October 4, and 590.58 crore on October 3.

Overall, last week, the Sensex climbed over 1,775 points and the Nifty 50 jumped by over 530 points. The market cap of BSE-listed firms jumped to 2,75,61,546.77 crore as of October 7, compared to the market cap of 2,71,84,601.83 crore as of September 30, 2022 — a rise of 3,76,944.94 crore.

On the Vinod Nair, Head of Research at Geojit Financial Services, the direction of the domestic market throughout the week was mostly determined by its global peers and the provisional business data published by major companies. A relief rally followed an unexpected dip in the US Manufacturing PMI, which raised expectations that the US Fed would ease off the pace of its policy tightening. However, hawkish commentary from Fed officials triggered selling towards the end of the week, prior to the release of the US jobs data. Stronger-than-anticipated job data may lead to a market decline as it could give the Fed more reasons to focus on inflation. The decision by OPEC to considerably cut production has raised oil prices, which is marginally unfavourable for importers like India. The dollar gained as a safer investment due to higher US bond rates, causing the rupee to hit a new low.”

What to expect in markets this week?

According to Nair, the market’s attention will be on quarterly earnings in the coming week, particularly for IT stocks. Additionally, the domestic market’s movement would be significantly affected by the inflation data that is anticipated for release next week. It is estimated that domestic inflation will continue to be high in September at 7.0%, similar to the previous month.”

While Apurva Sheth, Head of Market Perspectives, Samco Securities said, “The upcoming week is going to be a roller-coaster ride as a host of important events are slated to release. Markets across the globe will be dominated by the FOMC’s minutes that will be released next week. While global investors will be keenly monitoring inflation figures in the United States and China, Indian CPI print will be a key domestic factor to monitor. Further, the Indian IT companies will kick start the quarterly result season. Stock-specific swings will be evident, and when investors respond to earnings misses and beats, they should consider the company’s long-term prospects rather than focusing exclusively on quarterly results.”

On the 50-scrip benchmark, Sheth said, “The Nifty ended the week marginally above 1%. Following a hefty battering from 18,100 levels a few weeks ago, it appears that the bulls are finally making a comeback. The bulls are expected to maintain 17,000 for the month of October before attempting to retest at 18,100. Short-term resistance is positioned at 17,500 levels. Nifty50 closed the week at 17314.65, up 1.29%.”

The onset of Q2 corporate results is this week with TCS quarterly earnings to be the first major one scheduled on October 10. HCL Tech and Wipro to announce Q2 results on October 12, followed by Infosys on October 13.

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