Stock-Specific Action Likely As Earnings Season Kicks Off

After hovering near all-time high, stock markets are taking a breath for a while. In the last two weeks BSE Sensex and Nifty surged more than 1.5 per cent, despite weak global cues. Small-cap and Mid-cap indices were hovering at their all-time highs in the last couple of weeks. Mid-cap index increased 3.69 per cent and Small-cap also rose 5.03 per cent.

All sectoral indices remained positive, except IT which dropped 3.64 per cent. The realty index remained top performer for the period. After the demonetisation drive, the realty index has given better returns as compared to other indices. The curbing of black money has provided traction to organised players in the realty sector. The industry is reacting positively on the Real Estate Regulatory Authority (RERA) bill.

Bank Nifty has touched an all-time high at 21,776 last week. Mid-cap banking stocks also traded higher and performed spectacularly. Finance Minister Arun Jaitley also said that the Indradhanush plan is not the last one for capital infusion for recovery of banks’ bad loans. The government is planning more aggressively to curb non-performing assets of banks. In its first monetary policy for FY18, Reserve Bank of India (RBI) maintained status quo on repo rate. However, its raised reverse repo rate by 25 basis points to 6 per cent due to narrowing of the liquidity adjustment facility corridor. IT index was down by nearly 3.64 per cent. Trump’s visa reform missile eroded net worth of all IT billionaires in India over the two-week period.

On the global front, European indices remained performers and increased more than one-and-half per cent, which was higher than all other global indices. Dow Jones Industrial Average was up by 0.52 per cent; whereas, NASDAQ rose by 0.69 per cent. Hang Seng up by almost 0.28 per cent over the two-week period. However, Nikkei dropped almost one per cent.

India remained FIIs’ favourite investment destination as these institutions slurped up equities worth Rs.13328.5 crore. The domestic institutional investors (DIIs) also bought Rs.4889 crore worth of equities in last two weeks.

The geopolitical tension is increasing across the globe after Trump’s first attack on the Syrian bases. There are heightened tensions in the Korean peninsula and the Middle East. Also, the upcoming French presidential election has left investors nervous. As risks persist, precious metals and crude oil prices are touching four to five-month highs. The global markets may remain weak in the future. 

Going ahead, Indian capital markets will follow domestic cues, first being the onset of the results season. The market will witness stock-specific actions with the start of the Q4FY17 results season. Many key events such as demonetisation, Brexit, Trump’s administrative policies, among others, would have an impact on industry financials in FY17. We expect that the results for Q4FY17 will be better than the previous quarter.