Markets to Remain Positive on Corporate Results, Global Cues | CORPORATE ETHOS

Markets to Remain Positive on Corporate Results, Global Cues

By: | January 13, 2018
stock markets

Week that was…

This week Nifty breaches its key resistance level of 10550 and made a new high on 10680 led by positive global cues and expectation of strong case of revival in Q3 earnings. The benchmark index rallied 2.4% in the last 10 trading days which showing a continuation of secular trend of 2017.

Supportive global market and optimism ahead of earnings season helped the market to shrug off the initial inhibitions of peak valuation, sharp spike in crude prices andconcerns on potential fiscal slippages. Further, a cut in FY18 GDP growth estimate by CSO did not impact the movement since it was overtly conservative. Market was factoring incremental QoQ growth in GDP and expectations from budget helped the momentum. On the other hand concern over December CPI inflation rising to 5.1% & increase in oil prices added volatility.  However, IT index outperformed on account of relief from US H1B visa norms and expectation of positive outlook helped the market to record a new high. Government’s new wave of liberalization of FDI through relaxation of investment norms and ownership rules in single brand retail, aviation, real estate and Pharma was another factor attracting investor interest.  Positive start to earnings season led by IT & Private banks added further momentum to the market. The broad market continue to buoyant, while stock specific actions led to strong outperformance in mid& small cap stocks. Among the sectors, IT index and realty outperformed with a gain of 4% & 7% for the week. Liquidity from FIIs & DIIs continues to support domestic market sentiments. On global front, strong global metal prices and rising crude prices continue attract positive investor sentiments. Further, US investors remained optimistic on strong economic growth outlook led by better than expected quarterly earnings.

 Week ahead…

Market is likely to maintain its current positive momentum given strong liquidity and buoyancy in global markets. But in the near term the market focus will be on Q3 earnings season and budget related cues which will dictate the trend. CPI inflation & IIP data later today will key data to be watchful. The consensus expect an increase in December CPI inflation to 5.1% (vs 4.88%) which may create some volatility. While November IIP growth is expected to expand to 4.4% Vs 2.2% giving sense of improvement of manufacturing activities after GST led disruption.

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