Q3 earnings, FII flow, macro data among key factors likely to drive Dalal Street this week
This week, the market could take a pause to reflect upon the current exuberance and assimilate the upcoming corporate numbers as it has already discounted a major chunk of growth expectations, however, small corrections will be a part of this bull-favoured journey, according to analysts.
“Banking sector seems to be a worthy candidate to book short-term profits as it witnessed a bout of optimism due to the Budget. The metal sector may consolidate going ahead given that commodity prices are cooling off. Lately, autos seem to have turned into a crowded trade and given that MoM growth in unit sales is seen maxing out, one needs to be cautious in this space,” said Nirali Shah, Head of Equity Research, Samco Securities.
Here are a few key factors that will guide the stock market this week:
Q3 earnings
The Q3 earnings season is entering its last leg. A huge number of smaller companies along with some major ones are lined up to announce their financial results. They include BPCL, NMDC, Sun TV, Mahanagar Gas, Muthoot Finance, Bata, Eicher Motors, GAIL, SpiceJet, Titan, ACC, Coal India, ITC, Graphite India, MRF, Oil India, Power Grid, Power Finance, RVNL, Bharat Forge, HAL, Info Edge and Nalco.
RBI policy decisions
The bi-monthly policy meet that concluded on Friday gave a boost to the banking and financial stocks. Analysts believe they are likely to buzz even more. “RBI’s supportive measure to fund NBFC from banks under the LTRO scheme and the Committee’s decision to reverse CRR cut will keep the finance sector in focus in the coming days,” said Vinod Nair, Head of Research at Geojit Financial Services.
Stimulus package
The Senate approved a budget plan for US President Joe Biden’s $1.9-trillion Covid-19 relief package. House and Senate committees will now start a weeks-long process of working on their individual pieces of the actual aid legislation. The market will keep track of developments and react accordingly.
FII flow
Foreign investment in the equity markets that took a backseat for a few days last month resumed with a bang in February. They have invested Rs 10,793 crore in the equities so far in the current month. If they continue the trend, the market will keep galloping towards its next highs. Any break in trend means consolidation.
Inflation
The government will announce inflation data for the month of January, which will be eyed by market participants. The indicator is likely to come down further amid softening food prices. Consensus pegs the CPI inflation at 4.40 per cent. Besides, the Centre will also release data on industrial production and manufacturing output for December.
Loan growth
Investors will also eye the loan growth and deposit growth data to be released by the RBI. The central bank will also release forex exchange data that will show how many dollars it has been buying.
Technical outlook
Nifty50 has made an even bigger green candle in the week gone by, following a big bearish candle in the previous week, as bulls are in no mood to give bears control of the market trend. Overall market breadth remained positive as the risk-seeking sentiment prevailed after the Budget day.
“Other global equity indices including emerging markets like Kospi, TAIEX and DAX are all trading near all-time highs while the risk-averse asset classes like Gold and bonds are exhibiting weakness. We suggest traders maintain a bullish bias with an immediate support on the downside at 14,580,” said Shah.
