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This week, domestic equities will take cues from October-December quarter (Q3FY240 results and inflation data. More stock specific action will be seen as Heavyweights like HDFC Bank, Asian Paints, IndusInd Bank, Hindustan Unilever, Ultratech and Kotak Bank will report their numbers.
On the economic calendar front, markets will look for China’s GDP along with inflation data of United Kingdom and Europe. United States will be reporting existing home sales data and core retail sales, which could provide cues to Federal Reserve for its future rate actions.
Despite a volatile week, Nifty hit fresh all-time highs of 21,928 and managed to close in green led by sharp pull-up on the last day. Broader markets too gained with Midcap100 and Smallcap100 up 0.2 per cent and 0.7 per cent respectively. Sector, IT and realty were the top gainers – up more than 4 per cent each.
Tech majors - TCS and Infosys reported better than expected Q3FY24 results, despite weak demand environment, leading to rally in IT stocks. The deal pipeline too remains strong which keeps the long term outlook positive for the sector. This week too, the sector is likely to remain in focus as it would react to HCL Tech and Wipro results announced over the weekend.
Overall for Q3FY24, we expect Nifty earnings to grow 10 per cent year-on-year driven by domestic cyclicals, such as autos and financial services, which are expected to post 35 per cent and 17 per cent growth respectively. Oil and gas earnings are also likely to surge 21 per cent, while cement, capital goods, metals, and healthcare are expected to report a healthy 98 per cent, 32 per cent, 25 per cent, and 20 per cent growth, respectively.
Domestic market has been showing strong resilience supported by various positive news flows. SIPs for December witnessed a record registration of 40.32 lakh people (74 per cent YoY growth) reflecting confidence among investors in India's macroeconomic fundamentals and positive momentum in the market. India’s net direct tax collections too increased 19 per cent to Rs14.7 lakh crore, meeting over four-fifths of the FY24 target.
On the global front, US inflation came in higher than expected at 3.4 per cent in December month on the back of higher rents and food prices. Even US job data few days back came better-than-expected. All these are diminishing the probability of rate cut in early March by US Fed. Tensions too escalated at Red sea post US/UK strike on Houthis, thus raising the geopolitical risk further.
Nifty is now just 100 points away from crossing another milestone of 22,000. But with Q3 earnings season starting, we expect more of stock specific action to take place while overall the markets are expected to consolidate in a broader range with a positive bias.
(The writer is head – Retail Research, Motilal Oswal Financial Services Ltd)