Markets depend on results now

The Indian stock markets are waiting for cues from three important events in the coming week – Results of software major Infosys, industrial production data and the UPA-Left meeting on the nuclear issue. to be held on October 9. The markets may go up on Monday as the US job data for September was better than expected and there were upward revisions for July and August as well. The encouraging figures have postponed concerns regarding a slow down in the US economy.

Last Friday’s selling wave was mainly due to uncertainty on the US employment data front and the weekend factor.

The foreign inflows are still strong. “The foreign investors are in a buying frenzy and till that continues, the market will keep moving up,” said Vibhav Kapoor, group chief investment officer, IL&FS. The Indian market has been among the top three momentum markets, along with Hong Kong and China.

The Sensex is presently trading at a PE of 24, which is a yearly high. Foreigners have invested more than 5 billion US dollars in capital market following the US Fed rate cut.

The results season, beginning next week, will dictate how momentum and valuations play out in the near term. Motilal Oswal Financials has issued a results preview for the second quarter. “We estimate 2QFY08 earnings growth at 16 per cent for Sensex, as compared with 27 per cent in 1QFY08 and an average growth of 26 per cent in the last nine quarters”, the report stated.The slowdown in growth is attributed to the impact of rupee appreciation on export-oriented businesses and the effect of interest rates on the auto segment.

“Our profit estimates could see upsides due to forex gains and other income (Earnings in 1QFY08 grew at 27 per cent as against our estimate of 18 per cent, led by higher other income).”

Edelweiss has already told its clients “to buy only on dips.”

The IIP data for July revealed a slowdown in the growth rates, But the market discounted the slowdown as it was on a higher base and the monsoons generally impact production in July. It will be interesting to watch the August IIP data, which is to be announced next week.. Though it might still cross 18,000 mark on FII buying, volatility is expected to continue.

Most brokerage houses are expecting 18,200-18,300 levels on upper side and a steep correction thereafter. Profit booking has already begun from some retail and high net worth individuals. The Sensex was up by 2.79 per cent last week. The total market cap of BSE is Rs 5,402,061.28 crore, or $1.38 trillion in dollar terms.