Will Q3 earnings negatively surprise Dalal Street?

Global equities witnessed their first bout of selling in the calendar year 2022 yesterday, after minutes of the US Federal Reserve’s last policy meeting pointed at earlier and faster rate hikes, uncovering “a more hawkish Fed than some may have expected”.
That apart, over 90,000 fresh cases of Covid-19 back home also soured sentiment on Dalal Street.
The frontline S&P BSE Sensex declined over 900 points intra-day but, eventually, settled 621 points lower at 59,602.
The NSE Nifty, on the other hand, ended at 17,746, down 179 points.
 
Markets had been on an upswing during the past four sessions, after consolidating during the last few months of CY2021.
However, analysts expect volatility to return to the Street next week as India Inc kicks off Q3 earnings season.
As many as 45 companies set to report their December quarter results in the coming week including Infosys, Wipro, TCS, Mindtree, HCL Tech, and HDFC Bank.
 
According to Devangshu Datta, an independent market expert, the October to December period will be a “transitionary phase” for the global economy, including India, as inflation is at multi-year high, commodity prices are up, the US economy is apparently growing at a rapid pace, base effect is ebbing in India, and China is cutting down on high carbon industries.

For Sandip Sabharwal, founder of asksandipsabharwal.com, high input costs may lead to a miss on earnings expectations.
 
Sectorally, Sabharwal expects capital goods, IT, and telecom to perform well during the quarter.

That said, while these factors are already priced-in, there are certain headwinds that may negatively surprise the markets and lead to earnings downgrade post Q3 earnings.

Overall, the December quarter earnings may turn out to be a muted show as India Inc battles with faltering consumption, uneven economic recovery, rising input costs and subdued credit growth.
Given this, management commentaries on growth outlook, rather than reported figures this quarter, will be keenly tracked by market participants.
 
As regards today, investors should expect a range-bound movement amid lack of domestic and global triggers.

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