Global cues to dictate near term trend

Local market are expected to take cue from the global markets in the near term as earnings season has almost come to an end with majority of frontline companies having already declared their results.

Corporate results have been good. Aggregate results of 988 companies showed 17.10% rise in net profit on 21.60% rise in net sales in Q4 March 2008 over Q4 March 2007, so far. There was 27.30% rise in net profit on 23.40% rise in net sales in the year ended March 2008 over year ended March 2007.

i-flex Solutions, Century Textiles, JSW Steel, Union Bank of India and Ashok Leyland among others are the key results to watched out for during the forthcoming week

Markets across the globe have managed to stage a sharp pullback from lows hit in mid January 2008 on hopes the global credit-market turmoil will ease. The benchmark index BSE Sensex has risen 2,790.63 points or 18.84% from its low of 14,809.49 touched on 17 March 2008. However, it is still 3,606.65 points or 17% away from its all time high of 21,206.77 hit on 10 January 2008.

The market extended gains for the fourth straight week in the week ended Friday, 2 May 2008, tracking firm global markets. The 30-share BSE Sensex gained 474.14 points or 2.76% to 17,600.12, in the week ended. The S&P CNX Nifty rose 116.50 points or 2.27% to 5228.20, in the week.

Inflation remains the biggest concern for the Indian stock market. The measures taken by the Union government to control inflation have also added to uncertainty on corporate profit. Finance Minister P Chidambaram on Tuesday, 29 April 2008, said government will impose export tax on basmati rice and some steel products, and cut import duties on key inputs like ferro alloys and metallurgical coke. He said the measures were being taken to improve domestic supplies and to moderate prices. The government has already banned export of cement and non-basmati rice.

Given that parliamentary elections are scheduled next year (in May 2009), the government may leave no stone unturned in its attempt to rein in inflation.

The structural growth drivers of the Indian economy remain intact – India’s economy is expected to witness a decent-to-strong growth for a long period of time due to favourable demographics. Acceleration in infrastructure creation will be another driver of strong growth in India’s economy. Rating agency CRISIL in its latest outlook for Indian economy for the year through March 2009 has stated that the overall growth scenario is expected to remain strong with investment as the main driver.