Range-bound markets likely this week, earnings eyed

Investors to closely watch international events, PMI data

Indian shares are likely to remain range-bound this week, with investors focusing their attention on quarterly earnings reports from 175 companies, including TCS, Wipro and ICICI Bank. The US Federal Reserve’s meeting and news flows from Europe will also dominate trade.

Key stock market indices – Sensex and Nifty – ended with gains of about 1.6 per cent each last week, as the Reserve Bank of India (RBI) cut its key policy rate by a higher-than-expected 50 basis points, and concerns about Europe ebbed. The Sensex ended the week at 17,373.84, while the Nifty closed at 5,290.85.

“The market is likely to go up next week as there is clarity on few issues like the general anti-avoidance rules (GAAR) and the RBI has cut rates by a more-than-expected 50 basis points. Also, weakened rupee will attract investors towards the market,” said Deven Choksey, managing director at KR Choksey Shares & Securities. “5,400 will be a crucial level for the Nifty. If the market is able to breach that, the next trading range will be 5,500-5,700.”

EVENTS TO WATCH OUT FOR

* April 23 PMI data from China and Europe  

* April 25 US Fed’s policy statement 

*Quarterly results  
April 23  TCS
April 27  ICICI Bank  
April 28 Maruti Suzuki 

The rupee declined 1.5 per cent to 52.085 last week. The domestic currency is down 6.5 per cent from its recent highs of 48.69 touched on February 3.

Shares of Reliance Industries Ltd (RIL) may see a muted reaction on Monday after the company announced a 21 per cent drop in quarterly net profit after the close of market hours on Friday. “The market had already factored in negative results for RIL. The stock will have strong support between Rs 700 and Rs 720,” Choksey said.

The earnings season will gather pace next week with about 175 companies scheduled to announce their January-March quarter numbers. Investors will keenly watch earnings reports from TCS (April 23), Sesa Goa (April 24), Wipro (April 25), ICICI Bank (April 27) and Maruti Suzuki (April 28) next week to gauge the financial health of India Inc.

Among the major global events, the US central bank’s Federal Open Market Committee (FOMC) meeting on Tuesday and Wednesday will be closely watched. The central bank’s statement on Wednesday will give indications about the Fed’s confidence regarding the economic outlook and prospects for any further stimulus. Nearly 180 of S&P 500 components will report earnings next week, according to Reuters. Among these, Apple Inc’s earnings report after close of the US markets on Tuesday will be the most important.

The situation in Europe will continue to bother investors with 10-year bond yields in Spain moving past six per cent last week. The results from the first round of the French presidential elections will also be watched very keenly. Investors will also focus on Purchasing Managers’ Index (PMI) releases in China and Europe on Monday.

“After a strong March quarter, it’s now clear that we have entered a rougher patch in global share markets triggered by renewed worries about Europe and a softer patch of data in the US,” said Shane Oliver, head of investment strategy at Sydney-based AMP Capital Investors, in a note. “However, any correction should be mild — say 5-10 per cent rather than 15-20 per cent — and we still see share markets higher by the year end.”