RIL earnings to set market tone, Bihar in focus

The upbeat earnings from Reliance Industries will set the tone for the truncated week ahead

Benchmark stock indices rebounded in last two trading sessions, amid a rally in global stocks, to end higher for a  third straight week on expectations that the US Federal Reserve won’t raise interest rates soon. Banks led the gains amid strong August IIP data, while automobile stocks rallied on hopes of higher demand in the festive season, even as information technology (IT) majors declined after their earnings announcement.

In the week to October 16, the 30-share Sensex ended up 0.5 per cent at 27,215 and the 50-share Nifty ended up 0.6 per cent at 8,238.

“Markets ended the week on a positive note on the back of receding concerns about an early US rate hike. Supporting global markets also helped. The better-than-expected IIP numbers supported sentiments of growth improving in the domestic economy. Emerging market (EM) funds have seen flows after several weeks and that indicates growing interest of investors in EMs and particularly, towards India. Improvement in private sector capex will likely result in better earnings growth and valuations for the relevant sectors.” said Dipen Shah, head of Private Client Group Research, Kotak Securities.

A host of economic data was released during the week under review. Industrial Production in August 2015 increased by 6.4 per cent compared to 4.2 per cent growth registered in the previous month and 0.5 per cent in August 2014.

Consumer price index-based inflation for September reversed a two-month declining streak and rose 4.41 per cent year-over-year, because of higher food retail prices. Retail inflation for August was 3.74 per cent and for July was 3.69 per cent.

Wholesale Price Inflation eased for the 11 th  straight month in September, which stood at -4.54 per cent compared with -4.95 per cent in August.

India’s merchandise exports fell for the 10th consecutive month in September. Exports declined 24.3 per cent to $21.84 billion in September 2015 compared with $28.86 billion in September 2014.

Tata Motors had a stupendous rally for the third straight week after the company said the group's wholesales in September 2015, including Jaguar Land Rover surged 21 per cent over September 2014.

Other stocks too were in high gear with launch of new models ahead of the festive season.

Maruti Suzuki gained 4.1 per cent, M&M rose 1.6 per cent, while Hero MotoCoro and Bajaj Auto ended higher.

Reliance Industries continued to gain through the week ahead of its September quarter earnings. The company after market hours on Friday surprised the Street, reporting a 12.5 per cent rise in consolidated net profit at Rs 6,720 crore for the quarter ended September amid high refining margins. Gross refining margin (GRMs) for the September quarter stood at $10.6 a barrel, against $8.3 a barrel in the same period last year.

Metal stocks continued to sparkle amid rising global commodity prices, while strong industrial growth in August led to renewed buying interest in capital goods shares like L&T and BHEL.

Hindustan Unilever slipped four per cent after it reported a marginal drop of 2.6 per cent in net profit at Rs 962 crore for the quarter ended September 2015 impacted by price deflation, especially in the soaps and detergents segment as against Rs 988 crore in the same period a year ago.

IT major Infosys and TCS were the top Sensex losers post their earnings announcement. Infosys ended down 6.3 per cent after it cut its dollar revenue estimated for the current financial year.

The company said that for the fiscal year ending March 31, 2016, revenues are likely to rise by 6.4-8.4 per cent, down from a previous estimate of 7.2- 9.2 per cent in dollar terms.

TCS ended down 5.9 per cent after it reported lower-than-expected constant currency revenue growth for the fourth straight quarter. Continued weakness in its Japan-based insurance arm Diligenta and energy business weighed on the IT major’s topline. Revenue during the September quarter stood at Rs 27,165 crore (Rs 271.65 billion) as against a consensus Bloomberg estimate of Rs 27,229 crore (Rs 272.29 billion). Revenue in dollar terms grew sequentially by three per cent to $4,156 million, which was lower than the Street’s estimate of around four per cent.

Week ahead

The upbeat earnings from Reliance Industries will set the tone for the truncated week ahead while developments on the progress of Bihar polls would also be keenly watched.

Some of the major companies that are slated to announce their September quarter earnings include, ACC, Hero MotoCorp, Bajaj Auto, Wipro, Cairn India, Idea Cellular, HDFC Bank and Asian Paints among others.

A slew of global economic data such as China Q3 GDP, US housing starts and PMI indices for US, Euro zone and Japan is scheduled to be announced during the week.

The stock market will remain closed on Thursday, October 22, on account of Dussehra festival.