Earnings Could Be The Focus For The Markets
The market had been struggling for a clear direction and consolidating in a range for a couple of weeks. Finally, Nifty moved towards the uncharted territory on Tuesday, as after a gap-up opening, it pierced the August 28, 2018 peak of 11,760 and the high of 11,761 registered in the first week of April 2019. To the further delight of investors, it extended its upmove at the opening bell on Thursday and registered a fresh record high level of 11,856. The three aces for this rally of the markets were: IMD's forecast of normal monsoon this year, which was in contract to the Skymet forecast which had projected rainfall this year at just 93 per cent of the long period average, followed by an upbeat data from China, which reported a GDP growth of 6.4 per cent in the first quarter, higher than the consensus, and lastly, the consistent inflow of money from the FIIs. Just when the bulls were in a trance and were celebrating this movement with high fives as the Nifty touched the milestone of 11,850, the media reports came in that North Korea had test-fired a new “tactical guided weapon’ with a ‘powerful warhead’, the first such test since the talks between Donald Trump and Kim Jong-un ended without agreement. This sent chills down the spine of market participants and panic was seen in the markets due to which markets slipped off the day’s high and entered into the negative terrain for the day.
During the week, the D-Street was busy with announcement ranging from macroeconomic data to corporate earnings. Amongst the macroeconomic data, consumer inflation (CPI) touched a 5-month high level of 2.86 per cent for March 2019, in line with CPI inflation, the WPI inflation also came in higher at 3.18 per cent for March and the Index of Industrial Production (IIP) grew at just 0.1 per cent for February 2019. Infosys and TCS kicked-off earnings for the quarter ended March 2019. Infosys’ March quarter profit grew by about 10.51 per cent, but the company lowered its FY20 revenue growth guidance, while TCS net profit jumped 18 per cent.
On the global front, the US first quarter earnings season got off to a strong start with JP Morgan reporting good earnings. However, thereafter, the earnings have not been able to provide any direction to the indices as it has been a mixed bag. In the economic news, the US trade deficit fell to its lowest level since June 2018, mainly led by a dramatic drop in the trade shortfall with China. Also, the Federal Reserve released its Beige Book and the report indicated that economic growth in the 12 Fed districts expanded at a ‘slight-to-moderate’ pace. On the trade front, media speculation was rife that senior US and China officials could put the finishing touch in a final trade meeting before signing a trade deal as soon as late May or early June.
Going ahead, the Q4 earnings with will be under the microscope as two of the bigwigs of the Nifty50 index Reliance Industries and HDFC Bank will report their earnings and this may provide further direction to the markets. On the general election front, the voting for the second phase of the Lok Sabha polls is taking place on April 18 and the third phase voting will take place on April 23, 2019. We advise investors to continue to focus on fundamentally sound stocks and buying on dips, which could be a preferred strategy as long as the markets do not have any fresh crisis to deal with on the global or domestic fronts. The crucial level for the Nifty would be the previous week’s low of 11,549.
