But earnings may spook markets again, data suggest

Stocks have given up gains in several quarters on weak results

The sharp gain made by the market may not sustain as a new earnings season begins. In several previous quarters, stocks have given up pre-result gains due to lack of earnings support.

March saw one of the biggest rallies in stocks, with indices gaining over 10 per cent in a little over a month as the earnings season begins.

Hopes for an economic revival have been high among market participants since the Narendra Modi government came to power in 2014. However, a delay in earnings recovery and global turmoil have seen the market give up gains.

Rallies in the market have been significant just before results seasons. In March 2015, the Nifty traded above 8,900. By the time the quarterly earnings came the index declined to 8,400. Just before the June results, the market started off from 7,965 and reached 8,600 but lost all the gains later.

Near the September quarter earnings, the Nifty again rallied from 7,770 to 8,300, but declined thereafter. Again, the Nifty moved up from 7,600 to 8,000 in January but lost over 1,000 points by February.

"Given the fact that earnings did not pick up, the correction was logical. No market goes up in a straight line," said S Naren, chief investment officer of ICICI Prudential Mutual Fund.

"The recent rally is not warranted. There is a slowdown in the economy. This quarter may end up as bad as the previous ones. This is likely to continue for the next couple of quarters," said UR Bhat, managing director at Dalton Capital Advisors.

"Market returns will track recovery in corporate earnings, which are well below long-term averages," added Nilesh Surana, head of equities, Mirae Asset Mutual Fund.