Quarterly earnings, global macro data to guide Dalal Street

As we fully step into the quarterly earnings season, all eyes would be on the management commentary and outlook going ahead. Thus stock-specific action would pick up steam.

On Monday, investors would react to the Dmart numbers while keenly await the results of HDFC Bank as this would be the first result of the merged entity.

On the economic calendar front, US IIP and retail sales data would be released during the week. Even China’s GDP and IIP data along with Europe’s inflation data would be reported during the week.

Last week, domestic market yet again touched new highs boosted by positive global and domestic cues. Nifty continued its positive momentum for the third week in a row and hit a new high of 19,595. It ended with gains of 233 points (+1.2 per cent) for the week. Broader market too saw robust gains in the range of 1.3-1.8 per cent. IT followed by Metals were the biggest gainers with gains of 3-5 per cent.

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Global cues were supportive following the release of soft US inflation data - both CPI and PPI. US CPI data cooled down to two-year low at 3 per cent while the PPI inflation rose only 0.1 per cent month-over-month in June, leading to hopes that the Fed may soon take a pause.

On the domestic front, inflation came in at a three-month high due to high vegetable prices which somewhat worried investors and led to marginal profit booking. Some rebalancing in the benchmark indices also took place last week due to the merger of HDFC twins, which led to many changes at the index level. Among sectors, IT made a strong comeback post the announcement of TCS results which were in line with expectations but good deal wins boosted confidence. Most of the negatives seem to be priced in for the sector and valuations look attractive at this juncture which led to rally across IT names. Apart from IT, metals too witnessed good gains on hopes of more stimulus from China. Defence sector was also in the limelight following PM Modi’s visit to France where they were likely to sign several deals.

Buoyant secondary market is having a positive rub-off effect on the primary market which too is witnessing strong activity with most of the IPOs over last 1 month getting good response. Last week, Utkarsh SFB IPO saw more than 100x subscription while Senco Gold and Cyient DLM saw strong listing. This week, Netweb IPO would open for subscription.

Nifty was trading between 19,300-19,500 range for the last few trading sessions but finally managed to break through it over last two trading sessions. Going forward, we expect the positive momentum to continue on the back of healthy earnings, consistent FII inflows and improving monsoon. IT and Financials would continue to be in focus this week on the back of result expectations of many heavyweights in the two sectors. Also, monsoon-related stocks are likely to remain in momentum after rainfall turned surplus.

(The writer heads retail research at Motilal Oswal Financial Services Limited)