Q4 Earnings likely to dictate trend

The Q4 March 2008 corporate results will dictate the market trend in the near term. Analysts will be closely watching what the company managements have to say about the outlook for the year ending March 2009 (FY 2009).

Analysts will also scrutinize disclosures that companies may make regarding foreign exchange derivatives products that they have bought on the advice of their bankers. A steep decline in the value of the US dollar against the Japanese Yen and the Swiss Franc hit Indian corporates which have used these two currencies (Yen and Franc) extensively to swap their rupee denominated debt.

Stock-specific activity may rule the roost depending on the guidance given by company managements for FY 2009 at the time of announcing Q4 March 2008 results. IT bellwether Infosys Technologies kickstarts the earnings reporting season on 15 April 2008.

Foreign inflows will also dictate the trend. The 75 basis points Fed rate cut on 18 March 2008 has widened the spread between the US and India's main short-term lending of 7.75%. The Reserve Bank of India (RBI) is unlikely to follow suit and lower domestic rates, which have been held steady for nearly a year, as the rising inflation still remains a concern.

Inflation based the wholesale price index rose 7% in 12 months to 22 March, 2008, accelerating from the previous week's rise of 6.68%, government data showed on Friday, 4 April 2008. The rate is the highest reading since 4 December 2004 when it was 7.07%. The annual inflation rate was 6.54% during the corresponding week of the previous year.