Market eyes inflation, fourth quarter results this week

Investors hope the RIB will ease monetary policy more aggressively next month if inflation numbers turn out to be lower

Earnings number for the quarter ending March of a slew of companies and wholesale inflation data will set the tone for the stock market this week. According to fund managers and analysts, the undertone is cautious as foreign institutional investor (FII) inflows, which drove the rally in the emerging markets, including India, in 2012, is reversing slightly. Further selling by FIIs could result in the market extending losses as domestic institutions have remained on the sidelines or have been selling.

Last week, benchmark indices fell about a per cent with FIIs selling shares worth about Rs 2,400 crore, after remaining buyers to the tune of Rs 55,000 crore ($10.26 billion) since January 1. In 2012, FIIs poured $25 billion into Indian equities, driving benchmark indices up 26 per cent. On Friday, the National Stock Exchange index Nifty hovered above the psychologically crucial 5,500-mark.

The commerce and industry ministry will detail the whole price inflation (WPI) data for March on Monday. Wholesale prices are expected to have risen 6.40 per cent in March from a year earlier, according to a Reuters poll. This is lower than the 6.84 per cent of February.

"WPI numbers will set the tone for the markets as it is the penultimate number before the RBI policy is announced. We definitely expect it to be better," said Gopal Agrawal, chief investment officer of Mirae Asset Global Investments India.

Investors are hoping the central bank would ease monetary policy more aggressively next month if the inflation numbers turn out to be lower.

Technical analysts are not ruling out a rebound in the stock markets as long as the Nifty stays above the 5,470-levels, which is a key support for the Nifty. The Nifty closed at 5,528.55 on Friday.

"We expect it to touch a high of 5,650 as sentiments are overly pessimistic and there is a strong possibility of a reversal. Most sectors have been beaten down and can be looked at as good buys at this point," said Shubham Agarwal, associate vice president and senior analyst technical equities, Motilal Oswal Securities.

Reliance Industries will announce March quarter results on Tuesday. Tata Consultancy Service (TCS), Wipro and HCL Technologies are also scheduled to report fourth quarter earnings numbers during the week.

All eyes are on TCS after peer Infosys disappointed investors with lower-than-expected revenue guidance. Investors will closely watch other earnings numbers too, say analysts.

"So far, the markets do not look like they have discounted the corporate earnings," said Dhananjay Sinha, co-head - institutional research, Emkay Global Financial Services.