Positive Economic Data, Q3 Earnings to Drive Market Sentiments | CORPORATE ETHOS

Positive Economic Data, Q3 Earnings to Drive Market Sentiments

By: | January 20, 2018
stock market

Week that was…

Nifty this week continued its upward journey and made a new high on 10900 largely led by ease in fiscal deficit worries, positive global cues and a good start to the earnings season. The Nifty benchmark index rallied 2.0% for the week and is making higher highs with no signs of fatigue.

Market brushed aside worries caused by rise in December CPI inflation which was 17month high due to higher vegetable and oil prices. Buoyancy in November factory output which surged to 8.4% compared to 2.2% & 4.10% for the immediate preceding months and ease in WPI inflation to 3.58% were the key positive triggers for the renewed bullish sentiment. Bank Nifty led from the front owing to encouraging growth in industrial activity which raised the expectation for credit cycle improvement, while healthy domestic liquidity and strong INR kept the direction intact. The announcement of reduction in additional government borrowing requirement for the current fiscal to Rs20,000cr from Rs 50,000cr announced earlier eased the fiscal deficit worries perceived by the market. Additionally, reduction in GST rates on 29 items & 54 categories of services and simplifying the compliance process elevated Nifty to a new high. Though mid & small cap underperformed by 2% & 3% for the week but silver lining was seen in IT index on expectation of turnaround in spending. Nifty Private banking index gained by 4.5% for due to better than expected Q3 results. Realty, Metals & Oil & gas indices were the key underperformers due to profit booking and higher oil prices.

Week ahead…

Market is anticipating a sea change in the earnings trend starting from Q3 result. This is an extension of the marginal improvement we had seen in Q2. In Q2 adjusted PAT grew by about +4-5% for indices like Nifty50& Sensex. And this time market is anticipating a strong growth of 15-20% in PAT led by revamp in businesses and low base effect. Economic data like WPI, IIP and PMI also suggesting improvement in pricing and volume growth. This trend is expected to improve to FY19 – 20, a main reason for the market to be buoyant. For the week ahead market will closely watch the progress of Q3 results which will dictate the overall trend of the market, while volatility may be heighted due to F&O expiry next week.

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