Earnings And Liquidity To Drive Markets

Indian markets are trading on the positive side despite rising volatility across the global markets. Across the globe, markets are held back due to host of reasons ranging from trade war fears, Middle East crisis and rise in oil prices. However, Q4 earnings are expected to be major triggers for the domestic markets. The US markets remained weak with 1.0-1.5 per cent decline during the week, while European markets showed mixed performance due to concerns on tariff war. The Euro Stoxx and German indices put up negative performance, while UK's FTSE showed gain of 0.80 per cent for the week. Investors were seen chasing safe havens such as gold amid volatility in the markets. Gold prices rose almost by 3.17 per cent to touch $1369 per ounce. Gold prices are expected to witness a rally in 2018 if the volatility in the stock market aggravates further.

The domestic markets showed significant gains compared to global peers. This was because the domestic markets benefited from the rising trade war fears with more investors turning towards emerging markets. The benchmark indices BSE Sensex gained almost 1.2 per cent and Nifty 50 rose by 0.9 per cent during the week. Nifty Bank remained weak with rising corporate governance issues concerning private sector banks. Metal prices are firming up with more supply constraints emerging in the global markets. Aluminium gained the most in 7 years, rising 11 per cent till date due to sanctions on Russian oligarchs, which includes one of the world's major aluminium and alumina producer. Taking a cue from this development, metal stocks like Hindalco, Vedanta, National Aluminium Company, among others, gained during the week. Street analysts expect aluminium prices to rise further due to deepening crisis between Russia and the US.

Infosys is set to kick off Q4FY18 earnings season from April 13. We expect earnings to show mixed performance across the sectors, with consumer discretionary, FMCG and commodities expected to post strong earn­ings as the economy is seen recovering from demonetisation and GST setbacks. Banks are expected to post flattish results with rising provisions due to increased NPA levels and growing frauds and corporate governance issues, especially among public sector banks, while private banks with focuson retail lending are expected to show good performance. NBFCs are expected to show improvement in margin and asset quality, led by recovery in the rural market. However, slippages and divergence for PSU banks will be the key figures to watch out for. Airtel, the telecom major, may post first loss in 15 years, indicating the stress in telecom sector. Overall, the telecom sector results are expected to remain subdued. IT sector's outlook remains buoyant and investors will watch out for the guidance for FY19. Robust auto sales numbers indicate strong quarter for the automobile segment.

Going forward, global markets are expected to remain volatile, while domestic markets will be driven by earnings. Thus, we see FIIs pouring in the markets, supported by strong participation from the DIIs. Further, oil prices are also expected to move northwards in view of the tensions in the Middle East. This is expected to add inflationary pressures, raising the possibility of a rate hike by the RBI in the June monetary policy review. However, rising geopolitical tensions and trade war fears remain the key risks for the markets across the globe.