Fourth quarter results, RBI policy to set the tone

Some key corporate results which are due next week could provide near-term direction for the stock markets which have corrected after hitting their highest level in more than 2 years at the beginning of this month. A hike in the key policy rates is in the offing when the central bank announces its annual monetary policy for the year ending March 2011 on Tuesday, 20 April 2010.

Major results next week include, TCS, Hero Honda Motors, Axis Bank, HCL Technologies, Wipro, Ranbaxy Laboratories, Sesa Goa, Zee Entertainment, Jindal Saw, Great Offshore, State Bank of Mysore, Reliance Industrial Infrastructure, United Spirits, Piramal Healthcare, TVS Motor Company, Hindustan Zinc, Glaxosmithkline Consumer Healthcare, Procter and Gamble, Areva T&D and MMTC.

Earnings season kicked off on a good note last week with IT sector bellwether Infosys Technologies issuing a stronger revenue guidance in dollar terms. The company has projected a 16% to 18% growth in revenue in dollar terms at between $5.57 billion to $5.67 billion for the current year.

Meanwhile, market participants expect more monetary tightening action from the central bank to contain inflation. RBI is expected to hike key policy rates by at least 25-basis-points and also tighten provisioning requirements on bank lending to the real estate sector. The central bank, last month, announced a surprise hike of 25 basis points (bps) each in repo rate and reverse repo rate.

All eyes are on the monsoon this year after last year's drought. Good rains this year after last year's drought will boost farm output and rural incomes. But another monsoon failure will add to inflationary pressure which in turn may hamper the current strong economic rebound. The June-September monsoon season is important as about 60% of the country's farmlands are rain-fed and more than half of the workforce is employed in the agriculture sector.

The Indian Meteorological Department (IMD) issues a monsoon forecast, usually in the second half of April after considering weather observations in different parts of the world and extrapolating statistical data. A weakening El Nino is a positive sign for the monsoon this year.

Overseas investors have been moving cash into Indian equities lured by the prospects for robust economic growth and rising corporate profits. FII inflow in April 2010 totaled Rs 4720.70 crore, while the inflow in the calendar year 2010 totaled Rs 25365.10 crore (till 13 April 2010).