What to expect in a 3-day market week? Q4, CPI inflation, industrial production at key stocks

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Last week on Friday, Sensex rebounded to close at 59,447.18 up 412.23 points or 0.70%. The benchmark also broke through the 59,650 level before correcting in the closing hours. Meanwhile, Nifty 50 slightly shy of 17,845, corrected and settled at 17,784.35 up 144.80 points or 0.82%.

The last trading session of the day of the previous week was mainly driven by RBI monetary policy where rates remained unchanged, however, the central bank also restored the position of the liquidity corridor to pre-pandemic level. Even forecasting weaker economic growth and higher inflation ahead, RBI hinted at policy normalization.

From April 4-8, the BSE Sensex plunged more than 1.5%, while the Nifty 50 slid nearly 1%.

Speaking about the performance of the markets over the past week, Vinod Nair, Head of Research at Geojit Financial Services said, “The market has been cautious over the last 2-3 days ahead of the RBI meeting and its future position. policy. Measures in line with market expectations led to a relief rally.”

Nair added: “The week started higher due to the HDFC merger deal and monitoring of the progress of the Russian-Ukrainian war. Later on the market remained volatile ahead of the RBI policy meeting. Measures in line with market expectations led to a relief rally to end the week.The RBI kept the repo rate unchanged but hinted that accommodative policy needed to be ended in order to prioritize debt management. inflation rather than growth.

Now the markets are set for another week and corporate earnings and economic data will strongly dominate performance. However, other global factors will also have their share of influence.

However, this week’s trading session will be short, only 3 days, as the exchanges will be closed on Thursday and Friday due to Dr. Babasaheb Ambedkar/Mahavir Janayti and Good Friday holiday.

Business benefits:

TCS will focus on trading ahead of its fourth quarter results scheduled for April 11, followed by peers Infosys on April 13. Additionally, HDFC Bank and ICICI Prudential will announce their fourth quarter on April 16. India Inc will announce its January to March 2022 quarterly and year-end results for FY22, which will have a major impact on market movements.

Giving an outlook on the banking sector in the fourth quarter, analysts at JM Financial said in their report: “We estimate that earnings in our banking hedging universe will grow 67% year-over-year, 12% quarter-on-quarter in 4QFY22 , driven by healthy sequential loan growth, primarily in the large Banks Credit System, is expected to be slightly below the single-digit mark as higher corporate working capital requirements have contributed to the resumption of loan disbursements. in 4Q22 (8.5% YoY as of March 11, 2022) Margins are expected to remain close to 3Q levels (large banks benefiting from continued CASA accretion) and the sector expects policy rate hikes by the RBI, which could act as a tailwind for NIMs going forward. /10yr G-sec up 25bps/30bps/40bps, respectively) will remain a drag on overall revenue hor s interests.”

Regarding the IT sector’s fourth quarter, JM Financial analysts Manik Taneja and Dimel Francis said, “Sequential revenue growth in the sector is expected to moderate in 4QFY22 (revenue growth of 2.7 to 5.3 % QoQ c/c) with TechM and Wipro leading among Tier I techs. Tier II technologies will again outperform Tier I technologies in growth. EBIT margins will be down 110 to 340 bps on year-on-year basis in Tier I technologies. While demand remains robust, we believe downside risks to margins (current consensus expectations of “stable to higher” margins in FY23 on an annual basis, given continued supply-side pressures and the likely resumption of travel/installation costs in FY23. the exe rcice 23.”

Economic data :

India is set to release its Consumer Price Index (CPI) data for the month of March on April 12, along with Industrial Production (IPI) for the month of February on the same day. Globally, foreign investor appetite will be closely watched for domestic equities ahead of US inflation data for March due later this week.

In the April 2022 policy, RBI announced that it expects the consumer price index to stand at 5.7% in 2022-23, with a first quarter at 6.3% ; T2 at 5.8%; T3 at 5.4%; and Q4 at 5.1%.

ICRA, in its latest research note after the RBI policy, said: “We expect CPI inflation to average 5.6% in FY2023, with risks upwards, similar to the MPC’s latest forecast of 5.7% Our CPI inflation projection of 6.3% for the first quarter of FY2023 assumes full pass-through of the pending pass-through of rising crude oil and diesel prices, with no reduction in excise duties.”

Going forward, in this week’s market outlook, Nair said, “the focus will be on the fourth quarter earnings season, which begins next week initiated by the IT and banking sector. The sector outlook Banking are robust due to the rapid rebound in credit growth & balance sheet improvement while the outlook for IT is mixed as the fourth quarter is seasonally weak.The market is also awaiting the release of key national economic data such as the inflation rate for March, industrial production and manufacturing production data.

Trending stocks:

Mid and small cap stocks are expected to move with the start of the quarterly season. Nair said: “Mid and small cap stocks have become attractive after consolidation over the last 5-6 months. rate and inflation are factored into the current market price.”

Banking and IT stocks will also be central to their earnings.

Regarding the banking sector, analysts at JM Financial added: “We believe that despite a strong 4QFY22, incremental equity performance is likely to be driven by the impact of inflationary expectations on the demand outlook for FY23. and comments on margin/revenue growth. We reiterate our positive stance on large lenders and ICICI Bank and Axis Bank are our top picks in the sector.”

“We see at least a pause (and potential reductions in EPS estimates after a revenue/EPS upgrade cycle the sector has enjoyed over the past 18-21 months!) driven by margin resets, even if underlying demand/price trends remain favorable HCL Tech, Infosys and Tech Mahindra are our preferred picks among Tier I techs Persistent Systems and Mphasis among Tier II techs,” the duo said. JM Financial.

An 18,000 mark for Nifty 50?

In his technical view, Rupak De, Senior Technical Analyst at LKP Securities, said: “The benchmark Nifty index found support around the previous session’s low, resulting in a positive close for the day. However, at the upper end, the Nifty has found resistance around the lower band of the bullish channel. Going forward, the trend may continue in the short term. At the upper end, the index may find resistance at 18000 while, at the lower end, support exists at 17650.”

Other factors:

Oil prices will be watched closely as it is one of the major components of India’s import bill. Until crude oil prices average near $100 a barrel, the rise in this commodity will continue to be a cause for concern.

In addition, the evolution of the Russian-Ukrainian conflict remains a crucial factor for market performance. Russia has currently focused on the eastern and southern parts of Ukraine after withdrawing from the northern part, especially in the capital Kyiv.

After keeping active Covid cases well under control over the past two years, China is currently in the throes of its worst pandemic outbreak. In the latest development, the country has tightened its Covid measures and restrictions along with mass testing and new quarantine centres. Due to the intense third wave that closed schools and other business activities, 23 Chinese cities are reported to have implemented full or partial lockdowns.

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