Earnings Season To Bring Fresh Cues

As widely expected, the latest monetary policy review had nothing new to offer to the markets. The passing of two more key bills were the only stimuli in an otherwise uneventful week, says Saikat Mitra.

The Indian markets witnessed quiet trades in the last fortnight. The Sensex and the Nifty closed almost flat, gaining a mere 0.32 per cent and 0.30 per cent respectively. The fortnight preceding the one gone by had been an eventful one, with FDI in retail inducing optimism in the markets. After that, though, there has been a dearth of triggers, as a result of which the markets witnessed a flat close.

On the domestic front, all eyes were trained on the RBI’s quarterly policy review meet that took place on December 18, 2012. With the apex bank maintaining status quo on the rates, the meet went by without a murmur.

Among other significant developments was the Banking Laws (Amendment) Bill, 2011 and the Companies Bill, 2011 finally seeing light of day. This has also opened up the long pending issuance of banking licences. These two bills have a long-term impact and their importance for the economy and the markets cannot be judged in the shorter term.

The advance tax numbers for the December 2012 quarter went up by 10.44 per cent. This is positive in the sense that one can gauge the corporate profitability as the results season will begin from next month. Going forward on the Indian side, there is some important data that will be released that may give some direction to the market. The current account balance and the fiscal deficit data will be released on December 31, 2012.

On the global front, the talks on the so-called US fiscal cliff seem to be unending. By the time this issue hits the stands, we will have a clear picture on whether the US is tipping over the fiscal cliff or not. In Asia, the announcement by Bank of Japan (BoJ) plans to further ease the monetary policy there. The BoJ has left its interest rates at around zero to 0.1 per cent, while extending its asset repurchase program. It will now buy around JPY 101 trillion worth of assets, which will give a boost to liquidity. Ahead, there is certain data from the US that will be watched closely, including the initial jobless claims, new home sales and mortgage applications.

Coming back to the Indian scenario, in the broader market, most of the indices have closed the fortnight in the green. The BSE Mid-Cap and the BSE Small-Cap closed on a mixed note. The BSE Mid-Cap closed positive with 0.43 per cent gains, while the BSE Small-Cap dipped into the red, declining by 0.60 per cent.

On a sectoral basis, five of the 13 indices have closed in the negative zone. The BSE Metals index has secured the top spot, with a gain of more than five and half per cent. The BSE Auto (+3.05 per cent) and BSE Teck index (+1.83 per cent) were the other top gainers. The main draggers in the last fortnight were the BSE CD index (-5.37 per cent) and the BSE FMCG index (-3.05 per cent).

The money inflows remained strong in the last fortnight, with the FIIs pumping in an astounding Rs 11822 crore in equities. On a YTD basis, FIIs have pumped in Rs 110804 crore. DIIs ended the fortnight in the red, selling off equities worth Rs 409.30 crore.

We believe that the corporate results will be the main triggers that will drive the markets going forward, and maintain our bullish stance. We wish our readers a very happy new year 2013. Happy investing!