Markets Outperform on Strong Q3 Earnings, Global Cues | CORPORATE ETHOS

Markets Outperform on Strong Q3 Earnings, Global Cues

By: | January 8, 2018
Stock-Market high

Week that was…

Market started-off the New Year on a cautious note due to lingering concern on fiscal slippages and a sharp up-move in crude prices. Concerns of peak valuation came back to haunt investors sentiments. During last 2 weeks nifty was facing resistance to break above 10500 levels eventually triggered a consolidation. Despite positive December auto sales numbers, market started-off year on a weak note. Market was contemplating a risk posed by the likely populist agenda which may hurt the fiscal consolidation target earlier set by the government. The upside risk emanating from higher commodity prices and inflationary pressures has limited the scope for any further rate cuts in the near term was another major factor hurting  investor sentiments. Investors turned to sidelines and were seen waiting for the result season to begin for signs of earnings upgrade.

But by the last 2 trading days metals outperformed on expectation of strong earnings growth supported by firm global base metal prices whereas auto stock witnessed profit booking after the recent run up. On a positive note, favorable global cues due to strong US jobs data and improvement in domestic service PMI data for December helped the market to move out of the subdued phase of trading. Further, clarity regarding the time frame for the capital infusion of PSU banks added positive vibes in the domestic market. Strong buying interest in the midcap & small cap helped the broader index to outperform the key indices for the week.

Week ahead…

Market is trading at premium valuation supported by strong liquidity on expectation earnings revival and positive global cues. In recent times higher oil prices, rising inflation and RBI hawkish stance is warning signs for the market. Further, market is wary of a populist budget given this is last one before general elections. In the immediate future market will look for more budget related cues and as per progress of Q3 results season.

Mr Vinod V Nair is Head of Fundamental Research, Geojit Financial Services Ltd.