Q3 December 2008 earnings to dictate trend

The third quarter December 2008 results will dictate the near term trend of the market. The sentiment may remain edgy with investor confidence shattered by a massive over Rs 7000 crore accounting scam at IT major Satyam Computer Services. Satyam's erstwhile chairman B Ramalinga during trading hours on Wednesday, 7 January 2009, admitted that the company's books of accounts were doctored and profits inflated. The accounting scandal in excess of Rs 7000 crore has created shock and awe among the Indian and global investing community.

Market expects poor the Q3 December 2008 earnings from Indian Inc on high input costs, the credit crunch and high interest rates, coupled with the burden of piled-up inventories.

As foreign brokerage in its research report dated 5 January 2009 said earnings of 30 BSE Sensex firms are set for their first quarterly drop in Q3 December 2008, since the data was first made available in 1999. Morgan Stanley estimates the BSE Sensex earnings will drop 0.2% year-on-year basis compared with a growth of 5.5% and 20% in the September 2008 and June 2008 quarters, respectively.

IT bellwether Infosys Technologies will unveil its Q3 December 2008 earnings on Tuesday, 13 January 2009. As per a foreign brokerage, Infosys could well miss its December 2008 quarter earnings forecast in dollar terms, hurt by lower volumes and cross currency movements.

HDFC Bank, Bajaj Auto and Power Finance Corporation will unveil their December 2008 quarterly results in the week.

Inflation has been on a sustained fall since peaking at a 16-year high of 12.91% in the week to 2 August 2008, raising hopes of further softening of interest rates from the Reserve Bank of India. Wholesale Price Index (WPI) based inflation rate fell to a 10-month low of 5.91% in the week ended 27 December 2008 from 6.38% in the previous week.

On 2 January 2009, the Reserve Bank of India (RBI), cut the repo rate and the reverse repo rate by 100 basis points each, with immediate effect. Repo rate is the rate at which RBI lends to commercial banks and reverse repo rate is the rate at which RBI accepts deposits from banks. After the latest cuts, the repo rate is now at 5.5% and the reverse repo is now at 4%, the lowest ever.

The RBI also announced a cut in cash reserve ratio, the proportion of deposits banks must keep with the central bank, by 50 basis points to 5% with effect from 17 January 2009. Lower interest rates may revive the domestic economy, which has been slowing faster than expected due to high interest rates and the global financial crisis.

India's economy is expected to grow 7% in the fiscal year to March 2009 despite the global slowdown, and will maintain a strong pace of expansion in coming years, the Prime Minister said on Thursday, 8 January 2009