Q4 results hold the key amid negative global cues

Over the course of the next week, 63 companies will release their quarterly earnings scorecard including prominent names like Infosys, HDFC Bank, Bajaj Auto, etc

Spooked by geopolitical concerns over rising tensions between Iran and Israel, rising crude prices, a more expensive dollar, high US bond yields due to higher-than-expected inflation and receding hopes of an early rate cut by US Fed; the benchmark indices after touching lifetime highs during the early part of the week corrected sharply to remain unchanged on week-on-week basis during the week ended. Sentiment was also affected by the reports of the amendment to the India-Mauritius tax treaty and IMF warning of a decade of sluggish global growth unless central banks restored price stability and global leaders addressed the issue of debt distress.

NSE Nifty hit a fresh all-time high of 22,775.7 on April 10, but ended the week flat at 22,519.40. BSE Sensex also touched a record high of 75,124.28 on April 9, but ended flat at 74,244.90 at the close of the week. In the broader market, the BSE Smallcap and Midcap indices ended on a flat note. FIIs sold equities worth Rs6,526.71 crore, while DIIs bought equities worth Rs12,232.61 crore. Despite high food prices, retail inflation based on the Consumer Price Index (CPI) declined to a 10-month low of 4.85 per cent in March as against 5.1 per cent in February.

The Index of Industrial Production (IIP) rose to a four-month high in February, to 5.7 per cent, against 4.1 per cent in January. Investors will watch the Q4 earnings season closely to assess whether corporate profits are backing up the recent rally in several stocks this year. If quarterly results or projections of future profits fall short of expectations, that could put stocks at risk of looking expensive relative to companies’ earnings. Tensions between Iran and Israel added to investor concerns; and interestingly Gold and Silver futures gained sharply this week to hit a new record. It is pertinent to observe that on the back of inflation worries and geopolitical uncertainty; US markets posted their biggest weekly loss since March 2023. It was a losing week for everything from bank shares to energy and real-estate stocks. The week ended was a truncated one as Thursday was a trading holiday on account of Eid-ul-Fitr; and again the coming week is a truncated one as well with Wednesday being a holiday on account of Ram Navmi. The much-awaited Lok Sabha polls will start next week, with the first phase taking place on April 19. Near term direction of the market will be dictated by Q4 earnings, news reports on General Elections, geopolitical concerns in West Asia, international crude oil prices and other global cues.

Quote of the week: We don’t prognosticate macroeconomic factors, we’re looking at our companies from a bottom-up perspective on their long-run prospects of returning - Mellody Hobson

It’s very difficult to predict when the next recession or stock market crash will come, so many of the potential investors don’t even try. Instead, look for good companies with the strength to make it through the occasional challenging economic environment.

F&O/ SECTOR WATCH

Mirroring the undercurrent in the underlying cash market, the derivatives segment continued to witness robust volumes. Among sectors, Nifty Pharma index was down two per cent; Nifty PSU Bank, and Media indices shed 1.5 per cent each. However, Nifty Metal index was up 3 per cent, Nifty Realty index added 1.5 per cent, while Nifty Auto index rose one per cent. On the Call side, the maximum Open Interest was visible at 22,700 strike, followed by 23,000 strike. On the Put side, the 22,200 strike owned the maximum Open Interest, followed by the 22,000 strike. For Bank Nifty, the highest Call Open Interest was at the 49,000 strike, followed by the 49,500 strike, while the highest Put Open Interest was observed at the 48,500 and 48,000 strikes. Implied Volatility (IV) for Nifty’s Call options settled at 10.67 per cent and Put options concluded at 11.38 per cent. The India VIX, a crucial market volatility indicator, ended the week at 11.11 per cent. The Put-Call Ratio of Open Interest (PCR OI) stood at 1.34 for the week. Overall weekly options data indicates that 22,200-22,000 is expected to be key support area in the coming days, whereas the Nifty may face resistance at 22,600-22,700 levels. Observers expect some increase in volatility as the market approaches the first phase of general elections. However, bias is likely to remain in favour of bulls, so any dip should be used to create fresh longs. Focus of market players will be on the domestic cues including the quarterly earnings season. TCS, the country’s largest IT services exporter, started off the March quarter earnings season on a positive note by reporting better-than-expected numbers.

Over the course of the next week, 63 companies will release their quarterly earnings scorecard including prominent names like Infosys, HDFC Bank, Bajaj Auto, HDFC Life Insurance Company, HDFC Asset Management Company, Persistent Systems, Tata communications and Wipro. Expect more stock-specific action say punters.The market will also be closely monitoring the movement of oil prices, which are generally impacted by geopolitical events. India is the net oil importer, hence any spike in prices directly increases the fiscal deficit and inflation of the country. Avoid large positions in F&O segment warn old-timers.

Stock futures looking good Granules, IRCTC, Crompton, Metropolis Healthcare, Navin Fluoro, RIL and Syngene International. Stock futures looking weak are Dabur, Jubilant Foodworks, Oberoi Realty, PEL, REC, TVS Motors and Wipro.

(The author is a senior maket analyst and former vice- chairman, Andhra Pradesh State Planning Board)

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