Jayant Manglik, President at Religare Broking suggests not going overboard and maintaining positions on both sides
The market rebounded amid rangebound trade in the passing week after a loss in the previous week, with the Nifty rising 0.6 percent and Sensex 0.9 percent. The gains were driven by banking & financials, FMCG and technology stocks on the hope of good Q3 earnings and likely easing tensions between the US and China after recent trade talks meeting.
Further, relief to MSME sector by GST Council and likely retention of the fastest growing economy tag to India in FY20 by World Bank also aided sentiment.
The volatility is expected to continue amid corporate earnings, the movement in oil prices and fears of a global growth slowdown, experts said, adding the 11,000 level on the Nifty is possible only due to results.
"With the lowest factory output for November in 17 months at 0.5 percent and a mixed set of numbers from Infosys post market hours on January 11, markets are expected to enter next week with a negative bias," Rahul Sharma, Senior Research Analyst at Equity99 told Moneycontrol.
Overall Q3FY19 earnings, macroeconomic data, global market sentiments and crude oil price movement will dictate the trend on the bourses, he said, adding retail investors are advised to maintain a cautious approach.
Jayant Manglik, President at Religare Broking suggests not going overboard and maintaining positions on both sides.
Standard Chartered expects Nifty to remain rangebound with 10,200–10,800 (lower and upper band).
The broader markets underperformed frontline indices during the week with the BSE Midcap and Smallcap indices ending flat with a positive bias. On the sectoral front, Nifty Bank, FMCG, IT and Pharma indices climbed 1-2 percent while Metal lost a percent.
Foreign institutional investors were net sellers to the tune of more than Rs 900 crore worth of shares while DIIs remained net buyers, made buying more than Rs 1,100 crore worth of shares in the week.
Here are 10 key things to watch out for this week:
Earnings
As many as 80 companies on the BSE will declare their results for the December quarter this week starting from January 14–19.
Important results to track include names like (January 14) Indiabulls Ventures, ICICI Securities; (January 15) Zee Entertainment, Den Networks, KPIT Technologies, Trident; (January 16) DCB Bank, HT Media, MindTree; (January 17) Reliance Industries, HUL, Federal Bank, L&T Technology Services, Rallis India, AU Small Finance Bank; (January 18) Wipro, ICICI Lombard, SBI Life, Atul, L&T Infotech, NIIT Technologies; and (January 19) HDFC Bank.
Country's largest company by market capitalisation will announce its December quarter earnings on January 17. The key data points to look at in results would be the growth in retail, telecom and petrochemical businesses.
Analysts largely expect retail, telecom and petrochemical segments to report strong growth sequentially but there could be some weakness in the refining business. Most analysts expect gross refining margin (GRM) at around $8.5-9 a barrel for the quarter ended December 2018 against $9.5 a barrel in the previous quarter.
Benchmark Singapore GRM declined sharply by 31 percent QoQ to $4.2 a barrel in Q3FY19 due to weakness in gasoline crack spreads. International benchmark Brent crude fell 35 percent in December quarter and 6 percent in 2018.
"Petrochemical segment is expected to do better due to healthy deltas and strong volume growth in the segment. Positive developments in the telecom and retail segments should drive growth further for the company," Motilal Oswal said, adding GRM, petrochemical margins, update on telecom venture and future capex would key things to watch out for.
The FMCG major is expected to report strong growth in Q3FY19, driven by volume growth and operational performance along with price hikes taken in detergents and skin care categories during Q2FY19. Most analysts expect volume growth in the range of around 6-10 percent (against 11 percent in Q3FY18 and 10 percent in Q2FY19), which may drive revenue higher by around 10-13 percent for the quarter. Profit growth could be 12-20 percent YoY, analysts said.
"Volume growth will be driven by festive season, sustained rural demand and continued shift in demand from unorganised/small players to organised players in large categories like soaps and detergents. Further, cost-saving initiatives will continue to lead margin expansion. Although, A&P spends should remain elevated," Antique Stock Broking said.
ICICI Securities said the company should witness operating margin expansion of 208 bps to 21.6 percent in spite of higher raw material costs, benefiting from a focus on premiumisation, cost-cutting and market share gains.
Key things to watch out for would be comments on volume growth and consumer demand environment, pace of rural recovery, and performance of Lever Ayush and WIMI growth, Motilal Oswal said.
The country's second largest private sector lender is likely to continue to report more than 20 percent growth in profit as well as net interest income YoY with stable asset quality and a slight QoQ increase in provisioning due to IL&FS, analysts said.
"Bank should continue to deliver stable 20 percent YoY earnings growth on stable margins and loan growth. Other income could improve on treasury gains," Prabhudas Lilladher said, adding provisions could be slightly higher despite MTM gains as the bank could likely have exposure to IL&FS and could make provisions on the same.
Emkay said cost ratios will largely remain under current levels and that is structurally positive for return on assets. "Slippages to be similar to Q2; the impact of farm loan waiver on crop loans will be largely visible in Q4, while on term loans will be visible in Q3 itself."
Loan growth is expected to remain healthy at 25 percent YoY, driven by retail loans, while deposit growth is also likely to pick up to around 24 percent YoY, led by an increase in CASA and retail bulk deposits, according to Motilal Oswal.
Key issues to watch out for would be some stress in SME and retail book as indicated by the management; trends in digital banking/payments and various initiatives; overall balance sheet growth outlook and economic recovery, the research house said.
The software services provider is expected to play a key role on January 14 as the stock will react to its December quarter earnings announced after market hours on January 11.
Overall numbers were mixed with strong revenue performance and weak operational earnings, but the key points were an upward revision of full-year revenue growth forecast and share buyback worth Rs 8,260 crore, which all encouraged brokerage houses to keep buy rating on the stock with a price target around Rs 800 per share.
Profit in December quarter declined 12 percent QoQ due to one-off items (Skava) and additional depreciation along with weak operational performance (due to higher subcontractor cost and additional investment in digital). Constant currency revenue growth of 2.7 percent sequentially was much ahead of street estimates and 1.8 percent growth reported by competitor TCS, driven by key verticals.
The country's second largest IT services company raised its full year constant currency revenue growth guidance to 8.5-9 percent from 6-8 percent earlier and retained EBIT margin guidance of 22-24 percent. Large deal total contract value was strong during the quarter with deal signing worth around $1.5 billion in Q3.
Macro Data
On the macro front, markets on January 14 will react first to industrial output data announced on January 11 which slipped to 17-month low of 0.5 percent in November against 8.4 percent in October.
In the coming week, WPI and CPI inflation data are scheduled to be announced on January 14, and Balance of Trade data will be released on January 15.
On January 18, foreign exchange reserves for the week ended January 11 and deposit and bank loan growth data for the fortnight ended January 4 will be released.
Global developments, crude and rupee
Key issues to watch out for globally would be updates on the meeting held between the US and China to ease trade tensions last week, ongoing US government shutdown, among others.
Oil price and rupee continue to be in focus due to volatility. International benchmark Brent crude futures rallied 6 percent in the passing week and 20 percent from the low of $50.5 a barrel in December 2018 after declining from around $86 a barrel in October 2018.
The Indian rupee depreciated by a percent to close the week at 70.49 a dollar, becoming the worst performing currency due to rising oil prices and announcement relief package by the government for poor farmers. Strength in US dollar and buying by oil importers due to higher crude prices also dented sentiments.
Technical Outlook
Nifty50 closed the week tad below 10,800 after trading in a range of 140 points during the week and formed 'Doji' kind of pattern on the weekly scale.
The market is expected to be rangebound in coming week with strong support at 10,500 and resistance at 11,000 on the Nifty, experts said, adding this range could be broken on either side in coming days.
"The two Nifty levels 10,710 and 10,860 are major support and resistance during the current sideways market. And trader can take decisive trending call only once a confirm breakout happens," Shabbir Kayyumi, Head - Technical & Derivative Research at Narnolia Financial Advisors told Moneycontrol.
He said immediate resistance if breakout happens on the upside is 11,000 where maximum open interest in Nifty Call is and similarly, if breakout below the current support level happens then immediate support would be 10,500 where maximum open interest in Nifty Put is.
ADX indicator is falling continuously since November 2018 and currently trading lower around 16.50.
"It indicates the complete absence of any trend in the market. At the same time volatility index, VIX is trading in a tight range of 16.50- 15.20 since last two weeks. But now as the trading zone has narrowed substantially, a breakout can be expected over next 1-2 weeks," Shabbir said.
Corporate Action
Global Cues
