Week Ahead: Syria crisis, earnings rush among 10 things to keep the market on its feet

The week ahead is likely to be a busy one, with the earnings season getting underway. Geopolitical tensions on the Syrian front will also play a part.

  

Positive momentum in the market continued for the seventh consecutive session on Friday, helping benchmark indices post a healthy performance for the third week in a row.

The market shrugged off Syrian tensions that lifted crude oil prices to around four-year highs. Fall in March CPI inflation and better February industrial output growth boosted sentiment, but profit booking in the banking space and caution ahead of Infosys' earnings (due post market hours on Friday) caused volatility in the later part of the session.

For the week, the Sensex gained 1.7 percent and the Nifty rose 1.4 percent, while IT was the biggest gainer among sectoral indices, rising more than 5.5 percent.

Global markets were mixed this week amid geopolitical tensions over Syria and trade war concerns.

The next week is likely to be a busy one, with the earnings season getting underway, and geopolitical tensions on the Syrian front taking center stage.

Global clues, earnings and macroeconomic data to dictate market trend in the coming week. Apart from on-going geopoltical concerns and on-going earnings seasons, markets will now keep an eye on upcoming Karnataka State elections. Any new developments on that front will affect market swing.

Meanwhile, experts also see cues from the earnings front.

March quarter earnings are expected to provide further support to the market going ahead...Major companies which will announce Jan-Mar quarter earnings this week include CRISIL, Muthoot Capital, Tata Sponge, ACC, HDFC Life, Mindtree, IndusInd Bank, TCS, CDSL, HDFC Bank.

Syria attack to keep market volatile

US, British and French forces launched air strikes on Syria on Saturday morning, in response to a suspected poison gas attack that killed dozens of people.

The aim was to degrade its chemical weapon capabilities in what was the biggest intervention yet in the conflict by Western powers, according to a Reuters report.

The equity market does not like uncertainty and with a war-like situation, things could get really volatile for markets, not just in India but across the globe.

Indian markets are trading above key support levels and although a knee-jerk reaction cannot be ruled out, it would not be strong enough to derail the trend.

Nifty has not shown any correlation to such events in past. Syria is a relatively smaller country to be worried about and its impact should be minimal-to-negligible for Indian markets.

Syrian attack on markets would be minimal. The stock markets are valued with its future cash flows discounted to present value and unless the cash flows are dependent on such geographies, the impact on the stock market will not be significant.

Syria is a crude oil exporter but its 34th on the rank for crude export and is not material enough to alter the crude oil price for any inter-correlation impact of the stock market with commodities,

35 companies to declare their earnings

As the earnings season kicked off with the likes of Infosys declaring their results on Friday, the Street will wait for cues from many such companies. Over 30 companies are lined up to declare their March quarter and annual results next week.

These include DCB Bank, Gruh Finance, Jay Bharat Maruti, Orchid Pharma, ACC, Cyient, Sasken and Indiabulls Housing Finance, among others.

The quarter gone by is significant for the market as a recovery is being anticipated by experts, which is expected to shore up the Street going forward.

Infosys to react

Infosys declared its numbers for the March quarter on Friday and the Street will most definitely react to the developments.

The company's results were largely in-line with market expectations. India’s second-largest software services exporter reported a net profit of Rs 3,690 crore, which was in-line with a CNBC-TV18 poll of Rs 3,670 crore.

The stock closed 0.5 percent higher at Rs 1,169. It hit a low of Rs 1,150 and a high of Rs 1,185.90 during the session.

Brokerages are slightly cautious on the stock after its earnings announcement, and in some cases, there has been a cut in earnings estimates.

While Motilal Oswal has maintained a buy rating on Infosys, Dolat Capital has retained its sell rating on the stock as well. Prabhudas Lilladher, meanwhile, highlighted how lack of acceleration in core verticals is a concern.

TCS, HDFC Bank, IndusInd Bank to declare results

Some of the marquee names will also be announcing their results in the upcoming week. Heavyweights such as ACC, HDFC Bank, Tata Consultancy Services, IndusInd Bank, and HDFC Standard Life, among others, will declare their results.

Being index heavyweights, the Street will keep a close eye on their earnings trajectories.

Stocks in the news

ICICI Bank: BSE has sought a clarification from the bank on a probe by SEBI with regard to corporate governance issues.

Bharti Airtel: Delhi High Court has directed the company to modify its tagline of ‘Live and Free’ advertisements for the IPL.

Alok Industries: Lenders have reportedly agreed to a revised resolution plan.

United Spirits: The company's board has approved a stock split in the ratio of 5:1.

Reliance Industries: The company has raised Rs 3,250 crore from Japanese banks to fund capex plan.

Tata Group: Tata Projects won Mumbai Metro orders worth Rs 1,048 crore.

Metal stocks: The White House will reportedly decide on a rollback of tariff on Indian steel, aluminium.

Rane Brakes: The company reported a net profit of Rs 5.91 crore for the quarter ended March, compared with Rs 4.39 crore in the corresponding period a year ago.

ICICI Bank in focus

ICICI Bank continues to be on investors’ radar with new developments every day. Most recently, the Securities and Exchange Board of India (SEBI) is said to have initiated an inquiry into the corporate governance issues at the bank.

BSE too has asked for an explanation about the same from the lender. It remains to be seen how the lender reacts going forward.

Meanwhile, following Axis Bank chief Shikha Sharma’s cut in term duration, pressure is seen mounting on ICICI Bank’s board to decide on MD and CEO Chanda Kochhar's future at the bank.

Corporate Action

Apart from companies meeting for financial results’ declarations, stocks such as Philips Carbon Black will be in focus on the back of a stock split.

The ex-date for the split is April 19, with a face value split from Rs 10 per share to Rs 2 apiece.

Global Cues

Apart from developments from Syria, the market could keep an eye on key macro economic data from various nations.

For instance, Japan and the US will be releasing industrial production data, while the Chinese GDP numbers will also be declared next week.

Additionally, members of Federal Open Market Committee (FOMC) will be speaking on three occasions, which could give a few more cues to the Street.

Macro Data

Back home, while the market is looking to digest IIP and inflation trends, there will be a few more sets of data released. Wholesale price index (WPI) inflation for food, fuel, and manufacturing will be released on Monday.

Technical Factors

The Nifty made a ‘Doji’ type of candlestick pattern on the daily candlestick charts and a bullish candle on the weekly charts.

The index has managed to climb all walls of worry this past week and as long as the 10,350 level remains intact, traders are advised to stay with long positions.

The next possible target on the Nifty is placed above 10,600 levels, experts suggested.

A 'Doji' is formed when the index opens and then closes approximately around the same level but remains volatile throughout the day, which is indicated by its long shadow on either side. It appears like a cross or a plus sign.

The near term trend of Nifty continues to be positive and the next upside levels to be watched for coming week is 10,630 levels. The intermediate trend of Nifty is still down, the upside bounce of the last three weeks has not changed the broader negative status of the market. Creating trading long positions for small duration, profit booking at regular intervals, and a placing of strict stoploss could be a prudent trading strategy for next week.

MORE WILL UPDATE SOON!!

Brace for impact on Indian markets on Monday as US fires over 100 missiles on Syria

Indian markets are trading above key support levels and although a knee-jerk reaction cannot be ruled out it would not be strong enough to derail the trend.

   

The Indian market closed the week on a buoyant note with Nifty above 10400 and Sensex successfully reclaiming Mount 34K for the week ended 13 April but with the US, British and French forces launching air strikes on Syria, the bull run seen back home could come under threat.

US, British and French forces launched air strikes on Syria on Saturday morning in response to a suspected poison gas attack that killed dozens of people, aiming to degrade its chemical weapons capabilities in the biggest intervention yet in the conflict by Western powers.

More than 100 missiles were fired from ships and manned aircraft, the allies struck three of Syria’s main chemical weapons facilities, Reuters said quoting US Defense Secretary Jim Mattis and Joint Chiefs of Staff Chairman General Joseph Dunford.

Equity market does not like uncertainty and with a war-like situation, things could get really volatile for markets not just for India but across the globe.

“Historically, such attacks failed to derail the markets over a longer time horizon. But, in the short term markets may get rattled with such strikes. Hence, in other words, we can say that such incidents may provide a great buying opportunity for long-term investors,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.

Besides, this kind of information is already in public domain, although US President Donald Trump backtracked his words on Syria earlier this week which led to a rally in equity markets.

The strikes risked raising tensions in an already combustible region, but appeared designed not to trigger a military response from Russia and Iran, said a Reuters report. Nevertheless, Assad’s government and Russia responded angrily.

Russian officials on Friday warned of “consequences” after President Trump announced his approval of US-led military strikes in Syria against the Russian-backed regime of Bashar al-Assad, Fox News said.

Technically speaking, Indian markets are on a sustainable pull back mode as they are breaching critical resistance points on the upside successfully on a daily basis. The index is trading above its 200-days moving average (DMA), and 100-DMA last week.

Mohammad further added that as of now it appears that market shall find buyers on dips and 10350 itself can act as a strong support and in the worst case we may go down towards 10100-kind of levels and not more than that because of this issue.

Should investors back in India be worried?

Indian markets are trading above key support levels and although a knee-jerk reaction cannot be ruled out it would not be strong enough to derail the trend.

Nifty has not shown any correlation to such events in past. Syria is a relatively smaller country to be worried about and its impact should be very minimal to negligible for Indian markets.

Syrian attack on markets would be minimal. The stock markets are valued with its future cash flows discounted to present value and unless the cash flows are dependent on such geographies, the impact on the stock market will not be significant.

“Syria is a crude oil exporter but its 34th on the rank for crude export and is not material enough to alter the crude oil price for any inter-correlation impact of the stock market with commodities.

Agarwal further added that if Nifty does witness a selling pressure, it should find support within the 10200 – 10100 zone. Put congestions are extremely high in 10300 and lower strikes and there doesn’t seem to be any un-winding pressure yet.

MORE WILL UPDATE SOON!!

Infosys likely to open flat on Monday; experts see up to 11% upside

Most analysts remains mixed about their outlook on the stock after the company's Q4 results, but see an upside of up to 6-11 percent from the current levels.

  

Infosys, which reported its results for the quarter ended March post market hours on Friday, could open flat with a positive bias on Monday.

The company's Q4 results met the Street's estimates, but its outlook for FY19 has unsettled investors.

Infosys lowered its operating profit margin band to 22-24 percent for FY19, after its net profit declined 28.2 percent sequentially to USD 571 million in Q4 FY18.

The drop in fourth-quarter profit was also because Q3FY18's results included a one-time gain of USD 225 million on account of the conclusion of an advance pricing agreement (APA) with the US Internal Revenue Service.

The company's guidance for annual constant currency revenue growth is at 6-8 percent and for dollar revenue is at 7-9 percent, both in line with market estimates.

However, it revised its EBIT margin guidance downwards to 22-24 percent from 23-25 percent earlier. This will include the impact of revised compensation for FY19.

The management attributed the fall in guidance to rising investments in digital/IPs, increased onsite hiring, and higher S&M (large deal pursuits). The stock could open flat with a positive bias on Monday, and dips, if any, could be used to buy it for the long term.

Infosys results were in line with expectations. Margins, however, were stronger than expectations (24.7 percent vs expectation of 24.4 percent). The management looked confident for the stronger show in FY19 with revenues growing at 6-8 percent in constant currency terms as against 5.8 percent growth in FY18.

Margins, however, is expected to be growing at 22-24 percent (lower than FY18). Lower margins are due to higher spending in digital business. Infosys has a track record of delivering more than promised and we expect the same going ahead.

Salil Parekh, Infosys' new CEO, also announced plans to put up subsidiaries Skava and Panaya on sale in the post-results presser. The acquisitions were done under the leadership of his predecessor Vishal Sikka.

Most analysts remain mixed about their outlook on the stock after the company's Q4 results, but see an upside of up to 6-11 percent from current levels. The stock rose around 15 percent in the last one year.

Infosys' rapid acceleration in digital (26.8 percent of revenue and 7.2 percent CQGR over past 3 quarters) and trajectory of deal wins (12.3 percent YoY and strongest quarterly booking in last 6 quarters) are heartening, especially in view of the turmoil in the boardroom, which now seems far behind, say experts.

HDFC Securities, which has maintained a 'buy' call on Infosys, has put out a target price of Rs 1,300, which translates into an upside of 11 percent from current levels.

We believe Infosys is set for a revival, as investments are likely to lead on to quality growth. We reiterate our positive stance based on (1) scalability and momentum in large accounts, (2) digital scale (now a USD 2.8bn portfolio), (3) strong outlook for Europe/RoW, (4) recovery in North America BFS ahead, and (5) current valuations at greater than 20 percent discount to TCS.

The BFSI space grew by 0.1 percent on a QoQ basis in constant currency terms and is expected to pick up going ahead. On the other hand, retail is expected to remain soft in the near term.

The stock has already rallied in double digits from its lows and I see no reason why it can’t rally another 10-15 percent and if the BFSI space (which remained week this quarter) picks up on the US side with help the stock.

The other thing to look at is the impact of tax cuts which could result in increased spending towards IT budgets. I see no reason why this stocks can’t scale Rs 1,300 by the end of the year.

Meanwhile, brokerage firm Sharekhan has maintained its 'hold' rating on the stock, with a target price of Rs 1,250, which translates into an upside of 6 percent.

The company's management is hopeful of a pick up in spends by BFSI clients in CY2018, led by a ramp-up in deals in the insurance space and higher digital adoption by clients, it said.

Technical Outlook:

Infosys has entered a consolidation phase and is currently oscillating in a Symmetrical Triangle, following sharp moves in the previous quarters.

A sustained trade above Rs 1,100 this week can take it to the upper end of the pattern placed at Rs 1,185. Moreover, a breakout from the pattern on healthy volumes can extend the up move to Rs 1,250.

However, a close below Rs 1,100 could trigger a correction, which may drag it lower to levels of around Rs 1,020, experts suggested.

Currently, the stock is trading near the lower end of the range and it seems to be gearing up for a fresh rally. A multi-month rising trendline and a crucial weekly moving average are nearby.

"Thus this is a high probability level to initiate a fresh long position from trading as well as investment perspective. Hence, the investors can continue to hold on to the stock and can even look to add to the position at the current level.

The view that the strategy for traders should be to buy above Rs 1,140, with a stop loss of Rs 1,100, on a closing basis. The initial target on the upside will be Rs 1,200, with the potential to test the all-time high of Rs 1,279.

MORE WILL UPDATE SOON!!

Midcaps look promising at current levels; 4 stocks that could return up to 25%

Compared to 2017, the mid-cap space looks promising at current levels, and investors always look for a sector that has more steam in it.

  

The Nifty witnessed a pullback rally from the psychological level of 10,000, mainly on the back of global indices, which are expected to head upwards. On the weekly time frame chart, we observed 3 White Soldiers, which is a Japanese candlestick pattern.

Formation of 3 White Soldiers usually acts as a trend reversal pattern. In the current market scenario, the existing pullback may continue towards 10,700, which is a 61.8 percent retracement of the previous fall.

Technically, stocks that are trading above 200-DMA are considered to have strength in the current market trend. Also, the same seems to be contradictory to an efficient market hypothesis, which denotes relative strength may continue in future. From this reference, one can consider this as a value buy at current levels.

Corrections in the price in recent times have been sharper or close to 20-25 percent. This creates a buying opportunity in (companies with) quality management and business.

Every falling knife is not bound to cut your hands. The recent correction was due to global sentiments and overvaluations in some of the stocks.

Higher time frame charts, mainly those on an yearly basis, are bullish. So it can create huge opportunity in the space and may outperform large cap stocks in times to come.

As compared to 2017, the midcap space looks promising at the current level and investors always look for the sector that has more steam in it.

As per RRG (relative rotation graph) analysis, IT sector is oscillating in the leading quadrant pointing towards the north, wherein relative momentum as well as relative strength is very high. So, IT may outperform the benchmark index in the coming week.

Here is a list of top 4 stocks that can give up to 25 percent return.

MindTree: BUY| Target Rs 1,000| Stop Loss Rs 750| Return 17 percent

Mindtree on the monthly charts posted the horizontal consolidation breakout. With supportive oscillator, RSI has also posted trend line breakout that confirms the action towards the north.

Mindtree may continue to march in an uncharted territory. The intermediate target is placed at Rs 1,000, and the stock has potential to travel beyond the Rs 1,000 levels. On the other hand, the intermediate support placed at Rs 750.

NIIT Tech : BUY| Target Rs 1,000| Stop Loss Rs 735| Return 9 percent 

The stock has posted the rising channel breakout with intermediate support placed at Rs 735. After the breakout, the stock posted through back towards breakout, and NIIT Technologies posted a pullback of more than 10 percent from the recent top.

With the secular uptrend being intact on the higher time frame chart, such a pullback should be capitalised on as a buying opportunity for adding more longs given the conviction in the structural trend. The intermediate target for NIIT Tech is placed at Rs 1,000.

LIC Housing Fin Ltd: BUY| Target Rs 650| Stop Loss Rs 530| Return 17 percent

LIC Housing Finance, on the higher time frame charts mainly (monthly) is moving in a clear uptrend. In the current scenario, it is unfolded into a corrective pattern, wherein correction has been completed at an important Fibonacci retracement of 50 percent of its previous bull move.

The recent move suggests that the stock is poised for an initial leg of up move towards Rs 650 and one can accumulate this stock on dips till Rs 550. A strong support is placed around Rs 530.

Exide Industries BUY| Target Rs 300| Stop Loss Rs 210| Return 25 percent

Exide Industries is currently trading at Rs 240 levels. The stock is poised for an initial run up to Rs 260-300 levels, which translate into an upside of 20 percent. However, the stock can have extended moves.

The stock made an intermediate bottom at Rs 192, which happens to be 61.8 percent Fibonacci retracement level for the Rs 170-250 range.

The immediate resistance for the stock is placed at Rs 250. If the stock closed above this level it will open the way for Rs 260–300 levels on the upside.

Oscillators such as RSI on the Weekly charts has posted a trend line breakout, which eventually pushed the RSI on the higher side, adding strength to the underline.

The stock can be accumulated at current levels or on dips till Rs 225-230 for an initial run-up to Rs 290-300. The stock has limited downside till Rs 220–210.

MORE WILL UPDATE SOON!!

Nifty could see pressure at higher levels; Top six stocks which are looking attractive

There has been a sharp upside bounce in Nifty in the last three weeks, but this is going to be a temporary trading bounce.

 

We have witnessed a sharp upside bounce in Nifty in the last three weeks, but this is going to be a temporary trading bounce, and there is a possibility of weakness in the market/broader market from the higher levels

The near-term trend for the Nifty is still positive, and the index which is still sustaining above the hurdle of 10,450-480 levels for this week is likely to have a positive impact for next week. Hence, one may expect upside levels of 10,650 by next week.

We have witnessed a sharp upside bounce in Nifty in the last three weeks, and this has given a space for beaten down sectors to outperform.

This is going to be a temporary trading bounce, and there is a possibility of weakness in the market/broader market from the higher levels. Hence, outperformance in the stocks can be used for creating trading long positions by placing strict stop losses.

The main trend of mid and small cap sector is down, and the current upside bounce is expected to halt at the higher levels. An investor should stick to profit booking from the long trading positions at regular intervals

The near-term trend of Nifty is positive, and there is no indication of any exhaustion of current upside bounce in the market. One may continue with trading long positions in the index/stocks and ride a trend. Place strict stop loss.

One may look to buy Escorts, Glenmark Pharma, DHFL, Jindal Steel, Tech Mahindra, Hindalco, and Wipro, at the current market for the next few weeks.

MORE WILL UPDATE SOON!!

FIIs pull out $250 mn from India amid trade war & geopolitical worries

As the Nifty has been absorbing global headwinds in the current up move, the upcoming quarterly results on the domestic front would be keenly watched.

The Nifty is likely to consolidate above the important support of 10,350. We have seen writing in 10,300 and 10,400 Put options. Hence, any decline in the Nifty should find immediate support above 10,350 for some time.

As the Nifty has been absorbing global headwinds in the current up move, the upcoming quarterly results on the domestic front would be keenly watched.

The technology pack has provided some momentum in the last few sessions. This space may have limited declines in coming days. The index heavyweights from capital goods, FMCG, auto and oil & gas are expected to support the index in case of any intermediate profit booking.

Open interest in the Nifty has increased with current upsides, which means longs are formed in the index. Also, the lower Nifty premiums do not justify the fact that market is getting overvalued in the short-term. Positive bias should remain till the April expiry.

Better monsoon expectation is another trigger, which has led some pullback in rural-specific stocks. Positional short traders seem to be exiting these stocks. Hence, they can see good upsides in days to come.

The surge in crude prices and geopolitical tensions in the Middle East may lead to market consolidation. Otherwise, adverse news flows from a trade war perspective from the US and China are getting absorbed by the Nifty.

Bank Nifty: 25000 remains crucial level:

Starting the week on an optimistic note, the index finally managed to end well above 25,000, which was the previous week resistance.

A short covering play was seen in a few banking stocks whereas private sector banks witnessed a fresh round of long additions in which IndusInd Bank and Kotak Mahindra Bank made new lifetime high levels whereas Axis Bank and HDFC Bank also supported the up move.

As the index moved above 25,000, writing positions of 24,700 and 24,900 Put strike have shifted to the 25,000 strike whereas open interest is well distributed in the 25,300 to 25,500 strike Calls, which has kept the index move in check near 25,300.

IVs remained choppy for the week. This is likely to trigger some positive sentiments, going forward. We feel a close above 25,300 is likely to take the index towards its sizeable Call base of 25,500.

The current price ratio of Bank Nifty/Nifty continues to remain near 2.40 levels. Last week, the index added huge open interest on April 12. Thrice in the week, bears tried to dominate but levels of 25,000 continued to act as a decent support.

We feel that unless the index holds above 25,000, the outperformance in banking stocks is likely to continue. Going forward, the ratio is likely to move towards 2.44.

Geopolitics, trade war risks continue to keep FIIs at bay:

Trade wars and geopolitical tensions marred the week. However, towards the end of the week, the constant escalation/de-escalation rendered these news flows to mere rhetoric and risk sentiment stabilised to favour risk-on.

In a U-turn, Mr. Trump asked to take a relook at re-joining the Trans-Pacific Partnership, a multinational trade pact from which he withdrew the US in 2017.

During the week, FIIs continued to withdraw from the cash segment and took out US$250 million from Indian equities (in April their tally is over USD 500 million till now).

Outflows were also seen from other EMs with Taiwan seeing an outflow of USD 320 million. Indonesia and Thailand also saw outflows in the vicinity of USD 90 million each. However, South Korea saw inflows of USD 595 million.

In the F&O setup, the cautious undertone continued. There was fresh short in index future to the tune of USD 245 million. Index option buying of over USD 750 million was also unusually large, suggesting caution among participants.

Markets continue to remain focused on trade wars and geopolitical tensions escalation that is adversely impacting financial conditions and the global growth story.

The key gauge for assessing risk sentiment revolves around S&P 500, which despite the risk of shocks continues to hold February lows of 2535. Going ahead, this will continue to be a key pivot point.

If the index is able to move higher and end above 2675, it could trigger risk-on for other risk assets as well. This could very well reignite FIIs’ fund flow action into EMs as other variables like bond yields and dollar seem well anchored.

MORE WILL UPDATE SOON!!