Earnings season in full swing, markets expected to consolidate

WEEK AHEAD

This week, equity markets will take cues from the ongoing busy earning season and few economic data releases. Auto, Consumer & Pharma companies will be in focus as Tata Motors, Hero Motocorp, TVS Motors, Godrej Consumer, Marico, Pidilite, Lupin, Dr Reddy, and Cipla, among others, are set to announce their results.

Some of the other prominent companies that will announce their results are BSE, Paytm, Larsen & Toubro and Tata Power. 

On the economic calendar front, focus will be on the Bank of England policy statement. China’s service PMI and inflation data, United Kingdom’s January-March GDP numbers, and India’s service PMI data are some of the other key events to watch out for. Reaction to US employment data that got released over the weekend will be seen today. Thus overall we expect the market to consolidate in a broader range and base to gradually shift higher.

Nifty last week touched a new high of 22,794, on the back of healthy earnings announcements, domestic fund buying, and record GST collections. However, given mixed global cues, profit booking was seen in the market which led to Nifty ending with marginal gains of 56 points (+0.2%) to close at 22,476 levels. The broader market ended on a mixed note with Midcap100 up 0.6% while Smallcap100 fell 0.3%. 

Most of the automotive companies reported higher-than-expected monthly sales numbers which boosted auto stocks. Energy sector too, was in flavour after power demand spikes, following heatwaves in many parts of India. Crude prices, on the other hand, corrected significantly, which led to momentum in oil marketing companies.

Sentiments got a big boost after India's GST collections hit a record high of Rs 2.10 lakh crore in April, growing 12.4%. Infrastructure output also rose 5.2% in March. 

In addition, quarterly earnings have been healthy so far with many companies meeting market expectations. Thus robust earnings are keeping the hopes high and providing strength to the market.

Global markets, on the other hand, were volatile as the Federal Reserve outcome along with key data releases kept investors cautious. The Fed kept the key rates unchanged for the sixth consecutive time amid inflationary pressure. The hawkish commentary ruling out the possibility of rate cut in the near term dented sentiments.

Slower than expected United States GDP and manufacturing data too kept investors nervous. U.S. consumer confidence deteriorated in April, falling to its lowest level in more than one and a half years amid worries about the labor market.

(The writer is head of Retail Research, Motilal Oswal Financial Services Ltd)