Q1 June 2011 corporate earnings in focus

Indian stocks will on Monday, 18 July 2011, react to European bank stress tests results. The European Banking Authority will publish the results of its bank stress tests after European equity markets are closed on Friday, 15 July 2011. The European Banking Authority will also provide more information on the specific sovereign exposures of the lenders that have been reviewed.

Closer home, the focus remains on the Q1 June 2011 earnings. Investors will closely watch the post-Q1 June 2011 result management commentary to gauge the future earnings outlook at a time when Indian firms are witnessing cost pressures amid rising interest rates and staff costs. A hike in transportation costs will add to cost pressure of India Inc. As per reports, freight rates have gone up by 8% to 9% on all routes across India following a hike in diesel prices late last month.



HDFC Bank, Ashok Leyland and Crompton Greaves report Q1 results on Tuesday, 19 July 2011. Wipro, Dr Reddy's Lab and Exide Industries are set to announce Q1 results on Wednesday, 20 July 2011. Zee Entertainment Enterprises, JSW Energy, Biocon, Hero Honda, Hindustan Zinc and Kotak Mahindra Bank unveil Q1 results on Thursday, 21 July 2011. Private sector bank Axis Bank reports Q1 results on Friday, 22 July 2011.

Investors will continue to watch the progress of the monsoon rains. Weather officials expect an improvement in the rainfall next week. Monsoon rains were above average in June 2011, but dropped to 3% below average after slowing in the first week of July. Rainfall between July 7 and July 13 was 19% below average, while it was 25% below average between June 30 and July 6. As per reports, the rainfall distribution so far has been good except for areas in the country's extreme northwest and southeast, mainly in Gujarat's Saurashtra region and the Andhra Pradesh coast. While Gujarat is India's largest groundnut and cotton producer, Andhra Pradesh is a key rice-producing region.

The central state of Chhattisgarh and the Vidarbha region in Maharashtra are also rainfall-deficient, but the gap is expected to be bridged over the next few days. The grainbowl northern states of Punjab and Haryana, as well as parts of Uttar Pradesh, have all received above normal to normal rains, while eastern rice-growing states, including key producer West Bengal, have received good rains. Oilseed-growing regions in central India have also been lashed by abundant rains.

Rainfall in the month of July is considered crucial as sowing of a number of crops starts in June and good July rains determine the soil moisture and ensure proper development of the crops planted in June.