Benchmark equity indices ended marginally higher in the highly volatile week ended April 8 amid mixed cues with the HDFC-HDFC Bank merger announcement at the start of the week, the Fed’s hawkish stance with steeper interest rate hikes going ahead, and RBI retaining an “accommodative” stance with key rates unchanged. For the week, BSE Sensex was up 170.49 points (0.28 per cent) to end at 59,447.18, while the Nifty50 added 113.9 points (0.64 per cent) to end at 17,784.35 levels.
According to Siddhartha Khemka, Head - Retail Research, Motilal Oswal Financial Services, overall, equity markets have shown strong resilience despite headwinds from an uncertain global environment and persistent inflation. “Q4 FY22 earnings season will kick off from next week and will be the key factor for market direction going forward."
The coming week is a short 3-day week with Thursday and Friday being trading holidays on account of Dr. Babasaheb Ambedkar/Mahavir Janayti and Good Friday, respectively. India Inc’s Q4FY22 quarterly results season, as well as macro-inflation and industrial production data points, will steer the domestic equity market’s movements, next week.
Q4 Earnings Season Ahead
Indian companies are set to declare their earnings for that period over the next few weeks and that scorecard will play a huge role in determining the direction of stock markets at the beginning of the new financial year.
Amid the multi-year surge in global commodity prices and the threat of funds returning to the US, analysts and money managers believe that banks and financial sector companies are going to be the key drivers when it comes to Jan-March corporate profits.
“Adjusted PAT (profit after tax) is likely to grow by 32 per cent y/y, largely driven by a strong performance from Banks,” YES Securities said. “For financials, NII (net interest income) growth is likely to be strongest in the last 8 quarters as credit offtake picked up during the festive season,” the brokerage said.
“Going ahead, the focus will be shifted to the Q4 earnings season, which will start next week initiated by the IT and banking sector. Outlook for the banking sector is robust due to rapid bounce in credit growth and improvement in balance sheet while preview for IT is mixed as Q4 is seasonally weak," said Vinod Nair, Head of Research at Geojit Financial Services.
Apart from Q4FY22 results, the Central Statistics Office (CSO) is slated to release the macro-economic data points of the Index of Industrial Production (IIP), and Consumer Price Index (CPI) on March 12. Additionally, investors will look forward to the macro-economic data points of WPI (Wholesale Price Index) and India’s trade figures.
“The market also awaits the release of major domestic economic data such as inflation rate for March, Industrial production, and manufacturing production data next week," said Nair.
Nifty Technical Outlook
Technically, the Nifty is facing resistance near the 18,100 level however 17600-17,400 is a critical demand zone. If Nifty manages to take out the 18,100 level then we can expect a further rally towards 18,350/18,500 levels.
Banknifty is also pausing after a big move where 37,500-36,700 is a critical demand zone where we can expect fresh buying. On the upside, 38,500/39,000/39,500 are important resistance levels.
If we look at the derivative data then FIIs’ long exposure in index future stands at 69 per cent whereas the put-call ratio is sitting at 1.01 level which is neutral to positive for the market.