Published on 12/01/2018 9:40:03 AM | Source: LKP Securities Ltd

Markets to make a positive start; Infosys numbers eyed - LKP Sec

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Domestic Market View

Markets to make a positive start; Infosys numbers eyed

The Indian markets despite coming off their highs managed a positive closing in the last session, with traders eyeing earnings season to give further direction. Today, the start is likely to be in green on mostly positive global cues and market will be getting some support from the in line with estimates earnings of number one IT company of the country TCS, which posted 1.3 percent sequential growth in quarterly profit and said it sees improving business environment. Traders will also be getting some support with statement of NITI Aayog Vice Chairman Rajiv Kumar, who dismissing concerns of fiscal slippage has said the next Union Budget will not be a populist one. He said that there shouldn`t be a fear of fiscal risk because of slippage, because if at all, a fiscal slippage happens, it would only be for the right reasons. There will be some buzz in the steel stocks, as the Union Steel Minister Birender Singh has said that exports should account for 6-7 per cent of India’s total steel production in the next few years, up from the 1.5 per cent at present. The IT sector will keep buzzing, as after the inline performance of TCS another IT bellwether Infosys will be announcing its numbers today. Infosys is Infosys is expected to report slightly lower profit for the quarter compared to Rs 3,726 crore in previous quarter, however the revenue of the company are likely to improve marginally. There will be some other important results too, to keep the markets buzzing.

Domestic Market Overview

Benchmarks hit record closing high levels; Sensex surpasses 34,500 mark

Indian equity benchmarks ended the Thursday’s trade at record closing high levels, with frontline gauges surpassing their crucial 34,500 (Sensex) and 10,650 (Nifty) levels for the first time ever, as investors remained optimistic ahead of key corporate earnings later this week and the federal budget next month. Though, markets made cautious start and traded choppy in first half of the trade, as sentiments remained downbeat with rating agency Care Ratings’ latest report that uptrend in crude oil price is likely to have a major impact on India's fiscal position. Sentiments also remained dampened after a private poll showed that India’s retail inflation likely rose to a 17-month high in December, and that could push the central bank to tighten monetary policy. The December inflation data is due to be released on Friday, January 12. Traders also took note of a report which highlights that the Confederation of All India Traders’ (CAIT) has opposed Centre’s decision to allow 100% FDI in single brand retail via automatic route. CAIT has said that it is serious matter for small businesses and will hamper the welfare, upgradation and modernisation of existing retail trade.

Domestic bourses gained momentum in second half of the trade and hit their all time high levels with traders taking some support from global rating agency Moody’s latest report, which has said India and China remain the fastest growth economies in Asia Pacific region. Besides, the cabinet’s decision to allow foreign airlines to invest up to 49% in ailing Air India, and ease foreign direct investment (FDI) policies in some critical areas, including single-brand retail, broking services in construction, pharmaceuticals and power exchanges, too provided some strength to the markets. Market participants also took some encouragement with Credit ratings agency, Crisil Ratings in its latest report stating that India Inc’s top-line (revenue) growth is likely to hit a five-year high of 9% in Q3 (October-December) 2017-18. However, it noted that profits will continue to contract, on the back of rising commodity prices.

Global Market Overview

Asian markets end mostly in red on Thursday

Asian equity markets ended mostly in red on Thursday after Wall Street experienced its first lossmaking session this year overnight, hit by reports that China may slow or halt purchases of US Treasuries and that President Donald Trump may pull the US out of the North American Free Trade Agreement. Chinese Premier Li Keqiang reportedly said the economy expanded around 6.9 percent in 2017. The economic situation is ‘better than expected’, Li said in a forum in Cambodia. The National Bureau of Statistics is scheduled to issue annual GDP data on January 18. Japanese shares ended lower, hit by declines in automakers and electronic component makers as the strong yen soured investors’ appetite. Meanwhile, China stocks were little changed, with the benchmark index up for a 10th successive session even as investors took profit in consumer and energy firms after a recent robust rally.

US markets closed at fresh record highs on Thursday

The US markets closed at fresh record highs on Thursday, driven by a rally in energy and materials sectors, which followed rising oil prices higher. The rally comes a day after the S&P 500 and Nasdaq suffered the first down day of the year on anxieties about appetite for Treasurys from the world’s second-largest economy, China. Optimism about earnings growth and the potential windfall from lower corporate tax rates have been fueling equity market gains. Investors shrugged off weaker-thanexpected jobless claims and wholesale inflation data to chase stocks as the market geared up for the start of fourth-quarter earnings, which could provide a definitive catalyst for investors after what has mostly been a strong start to 2018. New York Fed President William Dudley said that the Federal Reserve may have to press harder on the brakes at some point over the next few years due to rising risk of a hard landing for the economy. The risk of economic overheating seems like an odd issue to focus on when inflation is low, but it strikes me that this is a real risk over the next few years.

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