Earnings to dictate market movement this week

Week Ahead

This week, the focus will shift towards January-March quarter (Q4FY24) corporate earnings, which started last Friday with better than expected numbers from TCS. Investors will also track key economic data points like India’s wholesale inflation, US core retail sales, China's January-March GDP numbers and UK & Europe inflation data for cues. In addition, the seven-phase Lok Sabha election will kick off from April 19th which could keep markets volatile, while Q4 results will lead to stock-specific action.

Last week, Nifty registered a new high of 22,776, while Sensex crossed 75,000 for the first time, with overall market cap crossing Rs 400 lakh crore during the week. Sensex took around four months to move from 70,000 and around nine months from 65,000 to reach this milestone. Nifty finally settled the week flat on account of profit booking witnessed on the last day. Broader markets, however, outperformed, gaining for the third consecutive week. Nifty Midcap 100 and Nifty Smallcap 100 closed with gains of 0.1% and 0.9% respectively.

A lot of stock-specific action was seen during the week on the back of pre-quarterly business updates released. Sector-wise, it was a mixed bag with buying seen in Metals, Realty and Autos. Metals stocks were in focus on the back of a rise in prices and a revival in manufacturing activity in China. Record high pre-sales data and lower housing inventory led to renewed demand in realty stocks. Recovery in exports and rising prices led to traction in specialty chemical stocks. Agri and rural-related sectors were also in the limelight after Skymet forecast a normal monsoon for India in 2024.

Asian Development Bank has raised India’s GDP growth estimate to 7 per cent for FY25. SIP inflows too touched record high for the second consecutive month, above 19,000 crore in March, while the equity segment saw a 37th straight month of inflow. 

Q4FY24 earning season began on Friday with TCS announcing its result, slightly ahead of expectations. We expect Nifty earnings to grow 6 per cent year-on-year in 4QFY24, driven by Auto (+20 per cent) and Banking (+15 per cent). Healthcare (+33 per cent) and Cement (+32 per cent) are also likely to report robust earnings growth. This week Angel One, Bajaj Auto, Infosys, Jio Financial, Wipro, and HDFC Bank will announce their numbers, thus, these stocks are likely to be in focus.

On the global front, the market witnessed some volatility and decline after US inflation data came above expectations at 3.5 per cent and the Federal Reserve meeting minutes highlighted a delay in rate cut due to sticky inflation. European Central Bank kept the interest rate unchanged at 4% and signalled a rate cut shortly. On the other hand, Fitch downgraded China’s outlook which could lead to FIIs diversion to India.

(The writer heads Retail Research at Motilal Oswal Financial Services Ltd)