What to expect in the 3-day week of the markets? Q4, Inflation, IIP for Major Stocks

Last week on Friday, the Sensex closed at 59,447.18, up 412.23 points or 0.70%. The benchmark also crossed the 59,650 level before correcting in the closing hours. Meanwhile, the Nifty 50 ended 144.80 points or 0.82% higher at 17,784.35, marginally lower from 17,845.

Last day’s trading session of last week was mainly driven by reserve Bank of IndiaHowever, the central bank also restored liquidity corridor conditions to pre-pandemic levels. Even as anticipated lower economic growth and higher inflation ahead, the RBI signaled policy normalisation.

Between April 4 and 8, the BSE Sensex lost over 1.5%, while the Nifty 50 lost nearly 1%.

Talking about the performance of the markets over the past week, Vinod Nair, Head of Research, Geojit Financial Services said, “The market was cautious during the last 2-3 days prior to the RBI meeting and its future policy stance. Market expectations Accordingly, measures were taken. For a relief rally.”

Nair said, “The week started on a bullish note as we tracked progress from the HDFC merger deal and the Russia-Ukraine war. The market remained volatile ahead of the subsequent RBI policy meeting. The measures were in line with market expectations. Weekend Rally. RBI kept repo rate unchanged but signaled end of accommodative policy stance to prioritize inflation management over growth.

Now the markets are gearing up for a new week and economic data as well as corporate earnings will weigh heavily on performance. However, other global factors will also have their effect.

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

Corporate Income:

TCS will focus on exchanges ahead of Q4 earnings scheduled on April 11, followed by peers at Infosys on April 13. In addition, HDFC Bank and ICICI Prudential will announce their Q4 on April 16. India Inc. will announce its January – March 2022. Quarterly and year-end earnings for FY12, which will have a major impact on market movements.

Giving Q4 outlook on the banking sector, analysts at JM Financial said in their report, “We anticipate healthy sequential credit growth in our banking coverage universe at 67% YoY in earnings, 12% YoY in QoQ 4QFY22 primarily across large banks.” Estimated to increase led by System. Credit, should be below the 10% mark as higher working capital requirement by corporates aided retail disbursements in 4QFY22 (8.5% YoY as on March 11, 2022). Margins at 3Q levels ( Large banks are likely to remain range bound) benefiting from continued CASA accretion) and the sector awaits a hike in policy rates by RBI which may act as a tailwind for NIM going forward. We expect that Non-interest earnings will decline 19%% during the quarter considering the Gsec movement (3yr/5yr /10yr G-sec up 25bps/30bps/40bps, respectively) will remain a drag on the overall non-interest earnings. “

With regard to the IT sector’s Q4, analysts Manik Taneja and Dimel Francis at JM Financial said, “Sequential revenue growth across the sector is likely to moderate in 4QFY22 (2.7-5.3% QoQ c/c revenue growth), with TechM And Wipro is the leader in Tier I tech. Tier II tech will outperform Tier I tech on re-growth. Tier I tech will see EBIT margins down 110-340 bps year-on-year. Although demand remains strong , we assume downside risks (existing consensus expectations) to margins on a year-on-year basis from ‘flat to high’ margins in FY13, supply side pressures and the potential for travel/facilitation expenses in FY13 Looking at the resumption. This is likely to drive both INFO and HCLT to mark the margin band for FY13.”

Economic data:

India is set to announce its Consumer Price Index (CPI) data for the month of March on April 12 along with the Industrial Production (IIP) for the month of February on the same day. Globally, the appetite of foreign investors in domestic equities will be the focus ahead of US inflation data for March scheduled later this week.

In the April 2022 policy, the RBI announced that it expects the consumer price index to be at 5.7% in 2022-23, with Q1 at 6.3%; Q2 at 5.8%; Q3 at 5.4%; and Q4 at 5.1%.

ICRA in its latest research note post RBI policy said, “We expect CPI inflation to average 5.6% in FY2023, which is similar to MPC’s latest forecast of 5.7%. Our estimate of CPI inflation is 6.3% .Without any excise duty cut for Q1 FY2023, pending increase in crude oil prices for petrol and diesel is considered as a complete pass of transmission.”

Moving on to this week’s market scenario, Nair said, “The focus will be shifted to the fourth quarter earnings session, which will be kicked off by the IT and banking sector next week. For the banking sector due to the sharp jump in credit growth.” Outlook is strong and balance sheet improving while preview for IT is mixed as Q4 is seasonally weak. Market also awaits release of key domestic economic data such as inflation rate, industrial production and manufacturing output data for March . “

Trending Stocks:

Midcap and smallcap stocks are witnessing a trend with the start of the quarterly season. Nair said, “Mid and smallcaps have become attractive after consolidation in the last 5 to 6 months. Such outperform trend can be expected with volatility in the short to medium term because of the current market war, rate hikes, etc. Growth and inflation are factored in. Price.”

Banking and IT stocks will also remain in focus among their earnings.

On banking, analysts at JM Financial said, “We believe that despite strong 4QFY22, incremental stock performance will be driven by the impact of inflationary expectations on demand outlook for FY23 and comments around margin/topline growth.” Likely to be inspired. We reiterate our positive stance. Large lenders like ICICI Bank and Axis Bank are our top picks in this space.”

“We see at least a pause (and a possible cut in EPS estimates after the revenue/EPS upgrade cycle that the sector has enjoyed during the last 18-21 months!) driven by margin reset, even though underlying demand/ Pricing trends remain supportive. HCL Tech, Infosys and Tech Mahindra are our preferred picks among Tier I techs. Persistent systems and Mphasis among Tier II techs,” said the pair of JM Financial.

18,000 points for Nifty 50?

In his technical outlook, Rupak Dey, Senior Technical Analyst, LKP Securities, said, “Benchmark Nifty found support around the low levels of the previous session, resulting in a positive close for the day. Found resistance around. Band of ascending channel. Going forward, trend may continue in near term. At higher end, the index may find resistance at 18000, while at lower end, support exists at 17650.”

other factors:

Oil prices will be looked into as it is one of the key elements of India’s import bill. Unless crude oil prices average close to $100 a barrel, the rise in this commodity will remain a cause for concern.

Furthermore, developments in the Russia-Ukraine conflict are still a significant key factor for market performance. Russia is currently focused on the eastern and southern parts of Ukraine, especially after withdrawing from the northern part of the capital, Kyiv.

After keeping good control of active COVID cases for the past two years, China is currently battling its worst pandemic outbreak. In the latest development, the country has stepped up its COVID measures and restrictions with massive testing and new quarantine centres. Due to the closure of schools and other business activities due to the third wave, 23 cities in China have either been in complete or partial lockdown.