Infosys earnings to dictate market trend

The market is likely to see a flat opening amid mixed global cues. Trading of S&P CNX Nifty futures on the Singapore stock exchange indicate that the Nifty could gain 7 points at the opening bell. IT bellwether Infosys reports its Q2 September 2010 results today.



In macro news, the government will unveil data on some wholesale price indices for the year through 2 October 2010 viz. the food price index, the primary articles index and the fuel price index at about 12:00 IST today.

The near term focus of the market will now shift to September 2010 quarterly earnings with brokerage earnings estimates now rolling over to FY 2012 (year ending March 2012).

Tier-1 IT firms viz. Infosys, TCS, Wipro, and HCL Technologies are seen reporting strong earnings growth in Q2 September 2010 as high volumes will boost operating margins. However, the IT sector faces headwind of a firm rupee in Q3 December 2010. The rupee hit a 2-year high against the dollar on Thursday, 7 October 2010. Higher volumes and price hike will aid earnings growth of most auto firms in Q2 September 2010 though analysts will closely eye operating profit margins and outlook on margins in the face of rising metal prices

Banks are seen reporting decent-to-strong earnings growth on the back of pick-up in credit offtake. Manufacturers of base metals are also seen reporting strong Q2 results on the back of higher metal prices. Increase in product prices will offset higher input costs for consumer staples firms in Q2 September 2010. But, cement firms will report dismal results due to a sharp fall in cement prices during the monsoon season.

Reliance Industries has reportedly raised $1.5 billion from its first benchmark sale of bonds denominated in US dollars to refinance loans for shale-gas ventures, for general corporate purposes and for further business investments.

Oil & gas stocks may come in spotlight on reports the government will call for bids for 34 oil and gas blocks for exploration under its ninth round of such auctions.

Asian markets were trading mixed on Friday, 15 October 2010. The key benchmark indices in China, South Korea, Singapore and Taiwan rose by between 0.12% to 0.70%. But, the key benchmark indices in Japan, Indonesia and Hong Kong were down by between 0.30% to 0.72%.

US stocks ended slightly lower on Thursday, 14 October 2010 as investors retreated from financials because of concerns over banks' foreclosure practices. The Dow Jones Industrial Average fell 1.51 points, or 0.01%, to 11094.6, snapping a four-session winning streak in a day of choppy trading. The Nasdaq Composite index shed 5.85 points, or 0.24%, to 2435.38 and the Standard & Poor's 500-stock index fell 4.29, or 0.36%, to 1173.81.

Back home, foreign funds continue to aggressively mop up Indian stocks. Net equity inflow in 2010 now stands at a record $22.70 billion, above last year's $17.45 billion, as per data from the Securities & Exchange Board of India (Sebi). The Sebi data includes FII inflow through primary and secondary market route.

A sizable chuck of FII inflow this year is from India-focused exchange traded funds as well as long-only funds.

Foreign funds bought shares worth a net Rs 1019.87 crore on Thursday, 14 October 2010, as per the provisional data from the stock exchanges. Domestic funds dumped shares worth a net Rs 694.27 crore on that day.

But, a section of the market is concerned that a strong equity issuance pipeline over the next six months will soak liquidity from the secondary equity markets. Indian companies are estimated to raise about Rs 36,000 crore from share sales over the next three to six months. This includes a large initial public offer (IPO) from Coal India. The government plans to raise about Rs 15,000 crore from divestment of 10% stake in Coal India. The Coal India IPO is billed as the country's largest issue ever. The IPO of Coal India opens for bidding on Monday, 18 October 2010 and closes on Thursday, 21 October 2010.

The government on Tuesday, 12 October 2010, set Rs 225-245 per share price band for the Coal India IPO. Retail investors and employees will get shares at 5% discount on the final issue price to be discovered through the book-building route. The Indian government is selling roughly 63.16 crore Coal India shares, or 10% of the company.

The Reserve Bank of India governor D Subbarao said over the weekend in Washington that the central bank would intervene in the foreign exchange market if inflows are "lumpy" and "volatile". The rupee has risen sharply over the past one and half months.

Customs, Central Excise and Service Tax revenue collections at all India level rose 44.4% to Rs 150686 crore during April-September 2010 as compared to corresponding period in previous year, data released on 13 October 2010 showed.

Industrial production rose at a much slower-than-expected 5.6% in August 2010 from a year earlier, sharply lower than the previous month's revised 15.2% growth, data showed on Tuesday, 12 October 2010. Manufacturing output rose an annual 5.9% in August 2010, lower than a 10.6% rise in August 2009. Industrial production growth for July 2010 was revised upwards to 15.2% from 13.8% earlier.

The government will unveil data on wholesale price index for September 2010 on Friday, 15 October 2010, which will provide clues on the central bank's policy stance at its next policy review scheduled on 2 November 2010. The wholesale price index, the most widely watched gauge of prices in India, rose 8.5% in August 2010.

The key benchmark indices edged lower in choppy trading session on Thursday, 14 October 2010 as profit booking emerged after the market scaled 33-month high at the onset of the trading session. The BSE 30-share Sensex was down 190.24 points or 0.92% to 20,497.64 and the S&P CNX Nifty was down 56.55 points or 0.91% to 6,177.35.