Market may remain volatile

The market may remain choppy next week as companies post their Q1 June 2009 earnings. Larsen and Toubro, HDFC Bank
, and Axis Bank are some major companies announcing results next week.

Despite the prevailing market weakness, the undertone still remains bullish as analysts expect a turnaround in the economy the near future as government stimulus packages take effect.

India's industrial output rose by a higher-than-expected 2.7% in May 2009, indicating interest-rate cuts and stimulus measures are helping revive demand.

With factory activity picking up in India, it is only a matter of time before brokerages and investment houses begin to upgrade earnings forecasts for companies, a move that would justify the spectacular rally in stocks in the last three months.

The International Monetary Fund on Wednesday, 8 July 2009, raised India's growth forecast to 5.4% for 2009, even as it projected the world economy to shrink by 1.4%. In April 2009, it forecast a growth of 4.5% for India.

Market moves next week will be dictated mainly by corporate earnings. Companies declaring their June 2009 ended quarter results next week include, Indowind Energy, Motilal Oswal Financial Service, Geojit BNP Paribas Financial Services, Power Finance Corporation, Jammu and Kashmir Bank, Piramal Life Sciences, Sintex Industries, Rallis India, Jubilant Organosys, IDBI Bank, Bajaj Finserv, IL&FS Investment Managers, Television Eighteen, Bajaj Auto, Zee Entertainment Enterprises, Mid-Day Multimedia, Bajaj Holdings, Exide Industries, Opto Circuits, Swaraj Engines, Colgate Palmolive, SKF India, Sasken Communication, Kirloskar Brothers, Radico Khaitan, Century Plyboards, Container Corporation of India, and Wyeth.

India's monsoon is another notable factor to watch out. Rains have caught up in the last seven days over most of India but water in the main reservoirs has more than halved, putting at risk even winter-sown oilseeds and wheat. Monsoon rains were 8% below normal in early July 2009

India, where 60% of farms depend on the monsoons, may be hit by a bad drought if annual monsoon rains remain weak with the window for planting crops closing by mid-July, a report from a US Agricultural Department (USDA) attache said.

Equities dropped last week on concerns of a ballooning fiscal deficit and disappointment that the Finance Minister did not announce major liberalization measures in his new budget. A cautionary statement on India's sovereign rating by Standard & Poor's (S&P), the credit rating agency, further weighed on Indian market.

A rating downgrade forces many foreign investors to withdraw money from a country since their agreement with investors does not allow them to invest in lower-rated economies. That can cause a big decline in share prices. S&P has a BBB-minus rating on India's foreign currency
long-term debt, the lowest investment grade. Any fresh downgrade will rank India as 'junk', or non-investment grade status.

However, a section of the market expects buying support for stocks at lower level due to recovery of the India economy from a slowdown last year.