Q1 June 2011 earnings to dictate near term trend

The market soon enters the crucial period of corporate earnings. Investors will closely watch the post-Q1 June 2011 result management commentary to gauge the future earnings outlook at a time when 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 the latest hike in diesel prices.

Housing finance major HDFC unveils Q1 June 2011 results on Friday, 8 July 2011. On the same day, private sector bank IndusInd Bank also reports Q1 June 2011 results. IT bellwether Infosys Technologies will unveil Q1 results on 12 July 2011.



On the macro front, the near-term economic growth may remain decent to high due to commissioning of projects. As per reports, capital expenditure projects worth a whopping Rs 8 lakh crore are expected to be completed in the year ending March 2012 (FY 2012). Many of these projects have rolled over from the previous year, reports added.

Investors will continue to watch the progress of the monsoon rains. The India Meteorological Department (IMD) on Thursday, 30 June 2011, said widespread rainfall is expected over Uttar Pradesh, the largest sugarcane growing state, in the next three to five days. The IMD said a slight increase in rainfall activity is also expected in the southern regions, while scattered rains are likely over central parts. Rainfall from the start of the monsoon season until 30 June 2011 was 182 millimeters, 11% above the long-term average.

According to reports, there could be a lull in the rains in the first week of July 2011 and that may continue until mid-July 2011. 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.

Data on inflation for June 2011 due on 14 July 2011 and data on industrial production for May 2011 due on 12 July 2011 could provide a cue on the RBI's likely policy stance at its first quarter review of monetary policy 2011-12 scheduled on 26 July 2011.