Rising commodity prices may weigh on equities; Q4 earnings in focus

Concerns over corporate earnings growth and macroeconomic worries arising from surging crude oil price may continue to weigh on stocks which have come off after an earlier sharp rally triggered by revival of inflow from foreign institutional investors (FIIs). Volumes could be low as next week is a truncated trading week – the market remains closed on Tuesday, 12 April 2011, on account of Ram Navmi and again on Thursday, 14 April 2011, on account of Dr. Ambedkar Jayanti.



High global commodity prices will add to pressure on profit margins of Indian firms caused by rising salaries and higher interest rates. Prices of aluminum and copper are seen rising further as Japan rebuilds after last month's massive quake and tsunami. Copper rose to a one-month high in London on Friday, 8 April 2011, on optimism global economic growth will sustain demand for industrial metals. Aluminum rose to the highest level since 2008.

The Q4 March 2011 corporate results will start trickling in from mid-April 2011. Investors will scrutinize post-result management commentary to gauge outlook on earnings. Increase in input costs will cap earnings growth of auto firms in Q4 March 2011 to be driven by decent to strong growth in top line on the back good volume growth. Strong lending growth is seen boosting bottom line of banks in Q4 March 2011. Cement firms are seen reporting weak Q4 results due to lower realizations and higher cost of imported coal. Revenue growth boosted by price hikes is seen lifting bottom line of FMCG firms in Q4 March 2011.

Infosys unveils Q4 and year ended March 2011 results on Friday, 15 April 2011, when it also gives its annual guidance for the year ending March 2012 (FY 2012). A recent sharp surge in rupee has tempered optimism about Infosys' guidance for FY 2012 triggered by underlying strong demand for offshore outsourcing.

Essar Oil unveils Q4 March 2011 results on Monday, 11 April 2011, Automotive Axles' Q2 March 2011 results are on Tuesday, 12 April, 2011, and Development Credit Bank reports Q4 results on Wednesday, 13 April 2011. Reliance Industrial Infrastructure (RIIL)'s Q4 March 2011 results are due on Thursday, 14 April 2011. MRF's Q2 March 2011 results are due on the same day. Mastek's Q3 March 2011 results are due on Friday, 15 April 2011. On the same day, CRISIL unveils Q1 March 2011 results.

A slew of major US economic data due next week such as March 2011 retail sales and consumer price index may strengthen expectations that the US will end its $600 billion bond-purchase program in June 2011.