Earnings to decide market trajectory

Benchmark indices consolidated to end around 1 per cent higher after sharp gains in the previous week with stock specific action seen post the announcement of fourth quarter earnings.  

Strong inflow by FIIs also helped the markets to remain positive for the second straight week, however, profit booking at higher levels capped the upside gains.

Read more from our special coverage on "MARKETS"

• Profit booking, global cues subdue markets; Nifty breaks 7,900
• Nifty slips below 7,900 on profit booking
• Stock specific action to continue; RIL, HDFC Bank in focus
• Markets turn negative; IT shares decline
• Nifty hovers around 7,950; financials gains, IT shares weak

In the truncated week ended April 22, the 30-share BSE Sensex ended up 211 points, or 0.8 per cent, at 25,838 while the National Stock Exchange’s Nifty50 ended up 49 points, or 0.6 per cent, at 7,899. Indices touched the highest closing level of 2016 on Wednesday. Markets were shut on Tuesday on account of Mahavir Jayanti.  

The broader market outperformed the benchmark indices. The BSE Midcap index ended up 0.9 per cent, whereas the BSE Smallcap index gained 1.2 per cent.

"The market had run up too quickly in the short term and therefore it is very likely that the correction has set in for the immediate short term. The ultra high short term bullish sentiments also point to some contra selling coming in the markets. Nifty50 will face stiff resistance at 8,000 levels where in some meaningful profit booking is expected. Traders should be cautious before initiating long position at current juncture as the risk reward ratio looks unfavorable for positional trader”, says Jimit Modi, CEO, SAMCO Securities.  

Meanwhile, foreign investors were net buyers in equities to the tune of Rs 1,703 crore till April 21, according to provisional stock exchange data.

Among global markets, Japan's benchmark Nikkei index climbed to an 11-1/2 week high after the US dollar rose above 110 yen for the first time since April 6, lifting a broad swath of shares that benefit from a weaker yen. Japan's benchmark index ended the week more than 4 per cent higher.

Oil prices rose in Asian trade on Friday, setting crude futures on course for solid weekly gains, as market sentiment becomes more upbeat despite ongoing oversupply. Brent has risen about 4.5 per cent so far this week. Crude is up by more than two-thirds since its 2016 lows between January and February.

KEY EVENTS

Wholesale prices in the country fell for the 17th straight month in March, dropping 0.85 per cent compared to 0.91 per cent in February.

India's trade deficit narrowed for the third straight month in March to $5.07 billion, the lowest in five years, as imports shrank at a faster pace than exports, data showed on Monday.

The European Central Bank left interest rates unchanged as expected on Thursday, holding them at record lows as it prints money to lift the economy and raise inflation.

STOCKS IN ACTION

BSE Bankex surged by almost 3 per cent during the week. Axis Bank, Bank of Baroda, Federal Bank, PNB, SBI and ICICI Bank surged between 4 per cent- 8 per cent.

Banking shares, mostly the PSU banks made significant gains during the week after the Reserve Bank of India (RBI) trimmed the list of debt-laden companies for loan provisioning in the fourth quarter ended March 31, 2016.

The country's second largest private sector lender, HDFC Bank rose over 1 per cent after reporting a 20 per cent growth in net profit in the January-March quarter to Rs 3,374.2 crore.

Index heavyweight Reliance Industries slipped by 2.5 per cent during the week. The company’s fourth quarter standalone net profit increased 4 per cent sequentially (up 17 per cent on yearly basis) in the quarter ending March 2016 to Rs 7,320 crore.

Tata Steel gained over 6 per cent after the company’s Indian group plans to exit its entire British steel operation last month. Britain said that it could take an equity stake of up to 25 per cent in Tata’s UK steel assets as part of a package of hundreds of millions of pounds of financing to help support a potential buyer.

Wipro dipped around 5 per cent after the company reported a flat consolidated net profit at Rs 2,235 crore against average analyst’s estimate of Rs 2,354 crore for the quarter ended March 2016.     

The second-largest IT services company, Infosys spurted over 3.5 per cent buoyed by better-than-expected revenue forecasts. The company posted 16 per cent rise in the fourth-quarter net profit and a strong revenue growth forecast for the current fiscal.

TCS fell over 4 per cent after reporting a lower-than-expected operating profit margin for the quarter ended March 2016 (Q4FY16).

THE WEEK AHEAD

Investments by foreign institutional investors, rupee movement and trends in global markets will be the key drivers of the market in the week ahead.

Axis Bank, Maruti Suzuki India, Bharti Airtel, Yes Bank, ICICI Bank, HCL Technologies, Vedanta, Interglobe Aviation, ACC, UltraTech Cement are few major companies among others that will unveil their Q4 numbers next week.

Markets are likely to remain volatile ahead of the expiry of April derivative contracts on Thursday, April 28.

Besides, the second part of the budget session of Parliament will commence on Monday, April 25.

On the global front, US Federal Reserve will hold its next two-day policy meeting on Tuesday, April 26 and Wednesday,  April 27.

In Japan, two-day monetary policy meeting of Bank of Japan (BOJ) will be held on Wednesday, April 27 and Thursday, April 28.