Next batch of Q2 earnings to dictate trend

Second quarter earnings from leading companies will be the focus for stock investors next week. Profit taking may cap upside as the market has more than doubled since early March 2009. Rising fund inflows from foreign investors amid a worldwide jump in appetite for risk, has driven the solid rally.

A special one hour Muhurat trading session will be held on Saturday, 17 October 2009, between 18:15 to 19:15 IST to pay obeisance to Lakshmi the Hindu goddess of wealth and prosperity. Investors make token purchases on the Muhurat trading day to mark the beginning of the new Samvat year as per the Hindu calendar. The market remains closed on Monday, 19 October 2009 on account of Diwali.

Foreign institutional investors (FIIs) inflow in October 2009 totaled Rs 4409.40 crore (till 14 October 2009). Foreign funds had bought equities worth Rs 17,328 crore in September 2009. FII inflow in the calendar year 2009 totaled Rs 64,546.60 crore (till 14 October 2009).

Quarterly results announced so far have boosted market confidence. A leading foreign brokerage suggested that Indian stocks are in a 'sweet spot' as earnings rebound. The report issued by the brokerage said that earnings for companies in the Sensex will gain 15% in the financial year ending 30 March 2010 (FY 2010), and 23% in the next 12 months, increasing earlier estimates of 10% for FY 2010 and 20% growth for the year ending March 2011 (FY 2011)

Some prominent companies which will announce Q2 September 2009 results next week include, Jaiprakash Associates, Larsen and Toubro, Maruti Suzuki India, Bharat Heavy Electrical (Bhel), Steel Authority of India (Sail), Tech Mahindra, Hero Honda, Sesa Goa, Punj Lloyd, IDFC, Dr Reddys Laboratories, JSW Steel, Zee News and Asian Paints.

The legal outcome of the tiff between the Ambani brothers is a major event to watch out next week. The spat between Mukesh Ambani-controlled Reliance Industries (RIL) and Anil Dhirubhai Ambani's Reliance Natural Resources (RNRL) is set for a Supreme Court hearing of 20 October 2009.

The dispute is over a deal for RIL to sell gas to Anil Ambani's RNRL at below-market rates as agreed in a 2005 family settlement to divide the business following their father's death in 2002.

The Reserve Bank of India (RBI), which slashed lending rates last year, is widely expected to keep interest rates unchanged when it releases the policy statement on 27 October 2009.

Marketmen will be looking for the RBI's comments on the outlook for policy later this year, as manufacturing activity picks up steam and a revival in demand reignite inflationary pressure.

However, C Rangarajan, the chairman of the Prime Minister's Economic Advisory Council said on Wednesday, 14 October 2009, that RBI may not raise its policy rates unless inflationary pressures build up sharply, but may use other tools to soak up excess cash. Mr. Rangarajan said India may want to await further clarity on inflation before reversing its accommodative policy.

Wholesale prices in India have recently started rising after several weeks of decline. Inflation based on the wholesale price index (WPI) rose 0.92% in 12 months to 3 October 2009, slightly above previous week's annual rise of 0.7%, data released by the government on 15 October 2009, showed. Within the WPI, the food articles index rose 13.34%. Meanwhile, the government revised upwards inflation for the year through 8 August 2009 to a much smaller decline of 0.37% from an estimated fall of 1.53%.