Markets to consolidate in the week ahead

Movements in crude oil and foreign fund flows will dictate the trend; corporate earnings and automobile companies will be in focus

Benchmark share indices are likely to consolidate in the week ahead with the next batch of corporate earnings to dictate the trend.

Markets snapped their two-week winning streak, amid weak global cues, after the Bank of Japan’s surprising stance on interest rate and lower GDP growth forecast led to a sell-off in global stocks.

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In the week to April 29, the BSE Sensex ended down 0.9 per cent at 26,607 and the Nifty50 settled 0.6 per cent lower at 7,850. However, the broader markets ended mixed with the BSE Midcap up 0.2 per cent and Smallcap closing 0.5 per cent lower.

“Global cues have overwhelmed the weakness in the market and being in the midst of the earnings season, volatility has also been accentuated. The week has seen significant profit booking amid a rally after the Budget. Markets are likely to consolidate in the week ahead with stock-specific activity that could leave to some up moves,” said Prakash Diwan, director, Altamount Capital Management.

The Bank of Japan on Thursday kept its monetary policy steady keeping the negative interest rate unchanged. Further, the central bank trimmed FY17 GDP growth forecast to 1.2 per cent from 1.5 per cent earlier for 2016-17, which led to a sell-off in global stocks.

Meanwhile, the US Federal Reserve at its two-day policy meet ended on Wednesday kept interest rates unchanged but signalled confidence in the US economic outlook, paving the way for a possible rate hike at its next policy meet in June.

The trend during the week was dictated by earnings from select index heavyweights and private lenders.

Reliance Industries ended down 5.4 per cent on profit taking after its results announcement. The stock had appreciated nearly 10 per cent in the past two months ahead of its fourth-quarter earnings. Meanwhile, on account of the huge Rs 1.13 lakh-crore capex for the ongoing refinery and petro-chemical expansions, and the proposed launch of Jio telecom, its gross debt increased to Rs 1,81,079 crore in the March 2016 quarter compared with Rs 1,78,07 crore in the December 2015 quarter.

ICICI Bank was the top Sensex loser down six per cent after it reported a 76 per cent drop in net profit in the January-March 2016 quarter to Rs 702 crore as it set aside additional contingency provisioning of Rs 3,600 crore. Further, the net non-performing asset (NPA) increased to 2.98 per cent from 2.28 per cent in the quarter ended December 2015.

Axis Bank ended with marginal losses. The private lender put loans worth Rs 22,600 crore under a watch list and expects 60 per cent of the watch list accounts to fall into the NPA category over the next eight quarters.

Bharti Airtel ended up three per cent. The telecom major has posted a 2.8 per cent increase in net income at Rs 1,290 crore for the quarter ended March, with high growth in mobile data revenue. Bharti Airtel also announced a buy-back of up to Rs 1,434 crore at Rs 400 a share.

YES Bank surged nearly eight per cent after it reported a 27 per cent growth in net profit in the March 2016 quarter at Rs 702 crore, compared to Rs 551 crore in the corresponding quarter a year ago on the back of high net interest income and other income. HCL Technologies slumped over 11 per cent after it reported lower-than-expected 0.3 per cent growth in consolidated net profit at Rs 1,926 crore for the quarter ended March 2016 on a sequential basis.

Outlook

Global events, along with the movement in crude oil prices and foreign fund flows, will dictate the market trend in the week ahead.

Markit Economics will release the India manufacturing PMI for April 2016 on May 2 and Nikkei India Services PMI will release the data on May 4.

Stock-specific action will be seen after the March quarter earnings with Adani Ports, Eicher Motors and Hero MotoCorp set to announce their results next week.

Auto companies will be in focus as they will release their April sales numbers.