Market Week Ahead: Earnings, macro data among few things to keep investors busy

Experts advise churning portfolio and buying quality stocks in this dip. They expect the stock specific action to continue as we are near fag end of December quarter earnings season.

Bears disrupted the extended reign of bulls on Dalal Street, dragging down benchmark indices over 5.5 percent in two consecutive weeks, and in effect, aligning market valuations with earnings and economic growth.

A sell-off, warranted for a long time, was eventually caused by two events – first, the Budget 2018 where government imposed 10 percent long term capital gains tax on equity and 10 percent dividend distribution tax on equity oriented MF, and raised fiscal deficit target; and second global developments where expectations increased for a faster hike in US interest rates (more than three) hinting early inflationary pressures on tight labour market with higher wages. RBI in its policy also cited inflation concerns while keeping repo rate unchanged.

Losses over the last two weeks wiped out the year-to-date gains in 2018 with investors losing Rs 7.79 lakh crore worth of wealth in just the two weeks. The 50-share NSE Nifty had rallied 29 percent in 2017, taking total gains before correction to over 35 percent (i.e. till January 25, 2018) on hopes of earnings and economic recovery.

There was, however, some sigh of relief only in broader markets in the passing week as mid and smallcaps recovered on bargain hunting, with the Nifty Midcap index rising 0.6 percent and BSE Smallcap gaining 1.8 percent (on earnings recovery in Q3FY18) after losing 8 percent in previous week.

Here are things that will keep investors busy next week:

Earnings

We are at the fag end of the earnings season and majority of largecaps as well as midcaps have already declared earnings. Earnings announced, so far, are stable to better-than-expected.

"The current earnings season is providing strong signs of revival in corporate earnings underlining the long term growth prospects, which is providing relief for investors," Vinod Nair, Head Of Research at Geojit Financial Services said.

More than 2,000 companies will announce December quarter numbers in the coming week, which include some PSU banks, engineering & construction, real estate, sugar firms etc.

Monday (566 companies): GAIL, Bank of India, Britannia Industries, Motherson Sumi, Indian Bank, Power Finance Corporation, NHPC, Sadbhav Engineering, Corporation Bank, Mangalam Cement;

Tuesday (504) : DLF, Shipping Corporation, MMTC, JK Tyre, IL&FS Engineering, Abab Offshore, CG Power, Snowman Logistics, Shalimar Paints, Max India, PTC India Financial, NMDC, NBCC, Punjab & Sind Bank, Indian Overseas Bank, Godfrey Phillips India, GMR Infrastructure, Fortis Healthcare, Chambal Fertilizers, Bajaj Hindusthan, Dilip Buildcon, CRISIL;

Wednesday (1,110): Sun Pharma, Tata Power, Grasim Industries, Jet Airways, Dena Bank, Allahabad Bank, DB Realty, Zicom Security, HDIL, Godrej Industries, Vivimed Labs, Satin Creditcare, Sakthi Sugars, Titagarh Wagons, Steel Strips Wheels, Shriram EPC, Speciality Restaurants, Pratibha Industries, PNC Infratech, NLC India, NCC, Rolta India, Repco Home Finance, Shree Renuka Sugars, Religare Enterprises, MT Educare, Rana Sugars, Punj Lloyd, Prism Cement, Patel Engineering, Infibeam Incorporation, Jindal Stainless, IVRCL, JBM Auto, Globus Spirits, Gitanjali Gems, Gammon Infrastructure, Endurance Technologies, GVK Power, GTPL Hathway, 8K Miles, Ballarpur Industries, Bharat Road Network, Bhushan Steel, Ahluwalia Contracts;

Thursday (7): Vesuvius India;

Friday: Varun Beverages.

Sun Pharma

Sun Pharma, which will announce its October-December quarter earnings on Wednesday, is expected to report weak numbers especially due to continued US pricing pressure but domestic numbers could be good.

"Companies like Sun Pharma, while having strong domestic presences will struggle to show growth in Q3FY18 due to the absence of significant launches in the US market. Current regulatory issues for Sun Pharma (warning letter for Halol plant) have stifled launches in the US market in the recent past and we expect this to reflect in the current quarter’s US numbers," HDFC Securities said.

It expects company's topline is likely to decline around 11 percent YoY, owing to the high base (gGleevec) and increasing pressure on Taro’s business. The launch of gCoreg CR (first generic) will mitigate some of the decline, it feels.

Prabhudas Lilladher expects 16.6 percent fall in topline, 47 percent in operating income and 40 percent in profitability while HDFC sees EBITDA margin to continue to show some sequential improvement on the back of QoQ growth in the US business and resulting operating leverage.

Key things to watch out for would be FY19 generic launch guidance, updates on Halol facility re-inspection and specialty pipeline progress.

Taro Pharma, the subsidiary which announced earnings last week, reported 30 percent decline in topline due to price erosion in the US, 87 percent fall in bottomline on one time charge of USD 38 million due to tax changes in US and 1,880 basis points contraction in operating profit margin.

PSU Banks

Country's largest lender State Bank of India, on Friday, reported quarterly loss (Rs 2,416 crore) for the first time in almost 17 years, with higher slippages and weak asset quality performance. Even loan and deposit growth was muted in Q3FY18.

Bank of Baroda also reported a 56 percent fall YoY in profit on higher provisions and marginally higher asset quality.

Stocks may react to bad numbers on Monday, but analysts feel there could be some improvement from Q4 and FY19 onwards in banks earnings. Infact, FY19 could be far better than FY18, they said.

"Worst is behind us and heading into FY19, lot of resolutions in Q1FY18 would clean up the path for corporate banks to move ahead strongly. Next 3-6 months could be challenging but after that there would be greener pasture," Krishna Kumar of Sundaram MF said.

Bank of India, Indian Bank, Corporation Bank, Indian Overseas Bank, Dena Bank and Allahabad Bank will announce quarterly earnings in the coming week.

Macro Data

Industrial and manufacturing production data for December month, and CPI inflation for January will be released on Monday while WPI inflation for January will be announced on Wednesday.

IIP growth in November jumped to 17-month high of 8.4 percent from 2 percent in October while Consumer Price Index inflation increased to 5.21 percent in December from 4.88 percent in previous month.

Balance of trade data for January will be declared on Thursday. Foreign exchange reserves for the week ended February 9, and deposit & bank loan growth for week ended February 2 will be released on Friday.

India’s forex reserves surged by USD 4.1 billion to a new high of USD 421 billion for week ended February 2.

Technical Outlook

Technical analysts feel the underlying trend of the market is still weak and breaking of 10,000 can be possible in short term.

"The trend of Nifty as per weekly and monthly is down. The present weakness is expected to continue in the coming weeks or months. Although Nifty placed at the immediate support of around 10,400 levels, the support could eventually be broken on the downside. One may expect Nifty to slip below the recent low of 10,276 levels," Nagaraj Shetti, Technical Research Analyst at HDFC Securities said.

Any attempt of upside bounce is going to be a sell on rise opportunity for next week and the downside targets to be watched is around 10,000-mark for the next couple of weeks, he added.

According to Ashwani Gujral, ashwanigujral.com, the market is expected to remain choppy in the coming week and 10,300-10,600 could be trading band for the Nifty.

F&O

F&O data also indicated that there could be further weakness in the market going ahead.

"The Call writers in the Nifty have been rolling their positions lower, which suggests towards increasing pressure on the index as we are approaching settlement. Profit booking is seen in 10900 Call writing positions and now these are getting formed at 10500-10600 Call strikes," ICICIdirect said.

It further said, "The pressure due to long liquidation is quite evident in so far outperforming Nifty heavyweights. This may keep the index under pressure for some time. If the Nifty is unable to hold above 10,600, it can slip towards 10,250 again towards settlement."

On Friday, Call writing was seen at the strike price of 10,400, which saw the addition of 7.99 lakh contracts along with 10,500, which added 5.07 lakh contracts, along with 10,600, which saw the addition of 4.22 lakh contracts.

Maximum Put writing was seen at the strike price of 10,100, which saw the addition of 6.94 lakh contracts, followed by 10,200, which added 5.62 lakh contracts and 10,400, which added 3.63 lakh contracts.

IPO

Healthcare services provider Aster DM Healthcare will open its IPO for subscription on Monday, with a price band of Rs 180-190 per share.

The company aims to raise up to Rs 980 per share at higher end of price band, of which it already garnered Rs 294 crore from anchor investors on February 9.

The issue, which will close on February 15, consists of a fresh issue of up to Rs 725 crore and an offer for sale of up to 1,34,28,251 equity shares by the promoter, Union Investments Private Limited.

The fresh issue proceeds would be utilised for repayment of debt; purchase of medical equipment; and general corporate purposes

Stocks in Focus

On coming Monday, State Bank of India, ONGC, Mahindra & Mahindra, BPCL, Bank of Baroda, Marico, Tata Steel, Sobha, Nalco, Sun TV Network, Capacit’e Infraprojects, PTC India, Va Tech Wabag, Amara Raja Batteries, MOIL, Syndicate Bank, Oil India, Suzlon Energy, Technofab Engineering, and RCF stocks will react to their earnings.

SIS India will react positively as the company bagged contract for security arrangements at Commonwealth Games.

Global Cues

On Monday, Indian market may react to the Friday's bounce back on Wall Street on but the sustainability of recovery could be difficult going ahead. The Dow Jones ended 330 points higher on last day of the week.

Japan's Q4 GDP; Europe's Q4 GDP and industrial production for December month, and United States' January CPI will be released on Wednesday.

On Thursday, Japan's December core machinery orders & industrial production; and US' January industrial & manufacturing production data will be announced.

 MORE WILL UPDATE SOON!!

Market Week Ahead: Earnings, F&O expiry among 10 things to keep investors busy

The market is expected to continue its liquidity-driven rally on earnings recovery hope and ahead of Budget 2018 (which will be presented on February 1) in the coming truncated week as well.

The bulls seemed unstoppable as the market continued its record-hitting spree in the first three weeks of the current calendar year, even in the face of rising crude oil prices.

Encouraging earnings numbers, a cut in GST rates on 83 goods and services, favourable global cues, buzz on allowing 100 percent FDI in the banking sector, and easing of fiscal deficit worries after lowered borrowing requirements, have driven the Nifty above the 10,900 level and the Sensex above the 35,500-mark for the first time ever.

In the passing week, the 50-share NSE Nifty rallied 2 percent to end at a fresh all-time closing high of 10,894.70 and the 30-share BSE Sensex jumped 2.66 percent to 35,511.58, taking year-to-date (2018) gains to 3.5 percent and 4.3 percent, on top of the 29 percent and 28 percent rallies in 2017, respectively.

Not only benchmark indices, but even the Nifty Bank index ended at a new closing high of 26,909.50, rising 4.5 percent during the week and taking total three-week gains to 5.4 percent on top of a 40.5 percent jump in the previous year.

However, the Nifty Midcap and BSE Smallcap indices underperformed equity benchmarks, falling nearly 2 percent and 3 percent in the week, respectively.

The market is expected to continue its liquidity-driven rally on hope of earnings recovery and ahead of Budget 2018 (which will be presented on February 1) in the truncated week ahead, but there could be some volatility due to expiry of January futures and options contracts on Thursday, experts suggested. Stocks specific action may continue ahead of Budget, they felt.

"Market is anticipating a sea change in the earnings trend starting from Q3 result. This is an extension of the marginal improvement we had seen in Q2. In Q2 adjusted PAT grew by about +4-5 percent for indices like Nifty50 & Sensex. And this time market is anticipating a strong growth of 15-20 percent in PAT led by revamp in businesses and low base effect. Economic data like WPI, IIP and PMI also suggesting improvement in pricing and volume growth. This trend is expected to improve to FY19-20, a main reason for the market to be buoyant," said Vinod Nair, Head Of Research at Geojit Financial Services.

He further said that for the week ahead, the market would closely watch the progress of Q3 results, which will dictate the overall trend of the market, while volatility may be heightened due to F&O expiry next week.

On the global front, developments in US over passing a spending bill to avoid a government shutdown as well as oil prices would also be closely watched out for, Teena Virmani, Vice-president – Research at Kotak Securities said.

The market will remain shut on Friday for Republic Day.

Here are 10 key things to keep investors busy next week:-

Earnings

Earnings season, so far, have been encouraging and also cheered the market from the start of the year. According to experts, Q3 and Q4 are set to dictate the FY19 earnings trend.

About 200 companies will announce their December quarter earnings in the coming week. Important ones amongst them are Maruti Suzuki, Axis Bank, Dr Reddy's Labs, Asian Paints, Havells India, RBL Bank, United Spirits, Canara Bank, InterGlobe Aviation, Idea Cellular, Mahindra & Mahindra Financial, Biocon and JSPL.

Reliance Industries and Wipro

The first on coming Monday, the market will react to Reliance Industries and Wipro's earnings that unveiled on Friday after market hours.

The flagship company of Reliance Group on consolidated basis reported a 16 percent profit growth quarter-on-quarter, driven by petrochemical business and Jio that reported its first ever profit at Rs 504 crore in Q3 against loss of Rs 271 crore in previous quarter. Gross refining margin was on expected lines at USD 11.6 a barrel QoQ in Q3.

Wipro's December quarter numbers missed analyst expectations as IT services dollar revenue growth was flat with EBIT falling 14 percent and margin contracted 250 basis points quarter-on-quarter, though the company said adjusted for one-time (provision of Rs 317 crore w.r.t a customer), margin stood at 17.2 percent that was slightly above analyst estimates of 17.1 percent for the quarter.

Maruti Suzuki

Overall for auto companies, December quarter earnings are expected to be strong on low base of last year due to demonetisation.

In particular, Maruti Suzuki, which is one of top picks (among largecaps) of majority of brokerage houses domestically as well as globally, will announce third quarter earnings on Thursday.

Brokerage houses expect the auto major's Q3 profit growth in the range of 13-24 percent and revenue growth around 13-16 percent. Operating profit growth is estimated at 19-25 percent YoY. Volume growth of more than 11 percent during the quarter driven by Baleno, Brezza and newly launched Dzire is likely to drive earnings.

Axis Bank

On coming Monday, country's third largest private sector lender is expected to report 22 percent growth YoY in profit and 4 percent in net interest income for quarter ended December 2017, according to average of estimates of analysts polled by CNBC-TV18.

Some brokerages are expecting big growth in profit due to low base in year-ago quarter. Loan growth is likely to be driven by retail business. Majority of them expect Q3 slippages to be lower than Q2FY18.

F&O Expiry

All January futures & options contracts will expire on coming Thursday and traders will roll over their positions to next month.

On the options front, maximum Put open interest was seen at 10500 followed by 10700 strikes while maximum Call OI was at 11000 followed by 10800 strikes, which indicated that 10,500 could be the support level and 11,000 could be resistance level for the Nifty in January series.

Significant Put writing was seen at 10800 and 10700 strikes which are shifting its support to higher levels whereas Call Unwinding was seen in all immediate strike prices.

“Option band signifies a trading band between 10,800 to 11,000 zones for the expiry,” Chandan Taparia, Derivatives, and Technical Analyst at Motilal Oswal Securities told Moneycontrol.

“It surpassed its supply trend line and now the same is acting as a support zone to push the market to higher levels. Now it has to continue to hold above 10,780-10,800 zones to extend the rally towards psychological 11,000-11,050 zones while on the downside supports are seen at 10,700 and 10,666 levels,” he said.

Technical Outlook

The 50-share NSE Nifty, which ended the passing week at fresh record closing high, made a strong bull candle on the daily candlestick charts.

For the coming week, analysts advise investors to remain long with a strict trailing stop loss below 10,790 as they expect strong upside momentum to continue next week and next target for the index to be 11,000 which is also its crucial resistance level.

"The indications of momentum oscillators and underperformance of broader indices are signaling a euphoric upmove in the market. The upside targets of Nifty could be around 11,000 and next 11,115 levels, which could be achieved in the next 1-2 weeks," Nagaraj Shetti, Technical Research Analyst, HDFC securities said.

Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in also said on such a breakout, a modest target of 11,100 looked certain.

However, as the market is entering into a truncated week with technical oscillators in steeply overbought zone, profit booking in next trading session can’t be ruled out, acccording to him.

IPOs and Listing

Apollo Micro Systems, which caters primarily to the defence and aerospace sectors, will debut on exchanges on coming Monday. The final issue price is fixed at higher end of price band of Rs 270-275 per share.

The Rs 156-crore issue saw a whopping oversubscription of 248.51 times during January 10-12, 2018.

Total six SME IPOs (three each on BSE and NSE) will open for subscription in the coming week and one will end on Monday.

Stocks in Focus

ONGC is going to acquire government's 51.11 percent stake in HPCL at Rs 473.97 per share. The acquisition which costs Rs 36,915 crore to ONGC, is expected to complete by January-end. After this deal, the government has revised its FY18 divestment target upward approximately Rs 92,000 crore, from Rs 72,500 crore earlier.

Dr Reddy's Labs will be in focus as the US Federal Court has imposed USD 5 million penalty for distributing prescription drugs in blister packs that were not child resistant.

DCM Shriram's consolidated net profit in Q3FY18 increased sharply 56 percent year-on-year to Rs 212.9 crore and revenue grew by 30.6 percent to Rs 1,783.7 crore while operating profit shot up 74.5 percent to Rs 329.1 crore and margin expanded by 465 basis points to 18.46 percent compared to year-ago.

Godawari Power & Ispat has posted consolidated profit at Rs 73.7 crore for December quarter against loss of Rs 9.6 crore in year-ago. Revenue increased 58 percent year-on-year to Rs 672.1 crore and operating profit grew by 88 percent to Rs 169 crore with margin expansion of 409 basis points YoY. The board of directors has approved company's proposal to raise Rs 500 crore via equities, GDR, ADRs and FCCB.

Gruh Finance, which surged 16 percent on Friday, showed a 28 percent growth in Q3 profit and 12.5 percent in revenue YoY. Operating profit grew by 16 percent and margin expanded by 282 basis points during the quarter YoY.

Hindustan Oil Exploration may react positively to its earnings as profit grew by a whopping 207 percent year-on-year to Rs 12.9 crore and revenue by 144 percent to Rs 13.4 crore for December quarter.

Lux Industries has reported a 31 percent year-on-year growth in profit at Rs 18.44 crore and 29 percent growth in revenue at Rs 297.4 crore for quarter ended December 2017.

J Kumar Infraprojects has received letter of acceptance from Delhi Metro Rail Corporation (DMRC) for Line 2A Architectural Station on Dahisar (east) to DN Nagar Corridor of Mumani Metro Rail Project, which is worth Rs 57 crore.

HDFC Standard Life has reported nearly 15 percent growth in Q3 profit at Rs 207 crore and its net premium grew by 19.5 percent to Rs 5,420 crore compared to year-ago quarter.

Future Retail will acquire Travel News Services for Rs 100 crore, which will help the company to expand its presence at airports, metro stations and universities where the majority of retail outlets of TNSI and TNSI Retail are operating.

CRISIL upgraded DLF's long term/non-convertible debentures rating to A+/stable from A and short term debt rating to A1 from A2+, removing from 'Rating watch with developing implications'.

IFCI said the government was considering capital infusion of Rs 100 crore during the financial year 2017-18 to the company.

Global Cues

Two major central banks - Bank of Japan and European Central Bank - will announce rate decision on Tuesday and Thursday, respectively. Economists largely expect status quo on interest rates but commentary will be closely watched, especially related to winding down stimulus program.

Apart from central banks' monetary policy decisions, Japan's manufacturing PMI for January, and Europe & US' manufacturing & services PMI for January will be released on Wednesday.

The US will announce its initial jobless claims data for the week ended January 19 and new home sales on Thursday, and Q4 GDP data on Friday.

MORE WILL UPDATE SOON!!