Major upcoming Q4 earnings, April derivatives expiry, global trends to keep markets busy this week

During the trading session from April 17th to April 21st, Sensex edged up marginally by 182 points or 0.3%. However, the Nifty 50 was marginally lower compared to the previous week. IT stocks are the top underperformers of this week after disappointing Q4 of TCS and Infosys.

On April 21st, Sensex closed at 59,655.06 up by 22.71 points or 0.04%. Nifty 50 ended flat at 17,624.05.

Talking about last week’s market performance, Vinod Nair, Head of Research at Geojit Financial Services said, “The sentiments in the domestic market were dampened by the weak start of the earnings season by IT bellwethers and their cautious outlook.”

According to Nair, the most significant risk for the market currently is a downgrade in corporate earnings forecasts. In addition, tepid cues from global peers are causing uncertainties, with investors anticipating a possible 25 bps rate hike by the Fed in its next meeting. Further, weak signals of a softening job market and declining manufacturing activity in the US have raised fears of a possible recession. Despite the RBI’s MPC unanimously deciding to pause rates, the members still hold concerns about high inflation, as revealed in the minutes.

For the trading week that will end on April 28th, Nair said, “Now, the market’s focus will shift to the banking sector, with major banks set to release their earnings.”

While Ajit Mishra, VP – of Technical Research, at Religare Broking said, the focus would remain on earnings for cues, in absence of any major event. First, participants will react to the Reliance and ICICI Bank’s numbers. In the following sessions, IndusInd Bank, Bajaj-Auto, Bajaj Finance, Maruti, Hindunilvr, Axis Bank, ACC, Wipro, Ultracemco, and Kotak Bank will announce their number during the week along with several others.

Besides, Mishra added, “The scheduled monthly expiry of the April month derivatives contract will keep the participants busy.”

Furthermore, Mishra said, “It is a healthy correction so far and Nifty should hold the 17,400-17,500 zone to the stage next leg of recovery else consolidation would set in again. On the higher side, the 17,850-18,100+ zone would act as a strong hurdle. Meanwhile, the participant should maintain a stock-specific approach with a focus on risk management. We reiterate our preference for banking, financials, and FMCG pack for long trades and suggest avoiding IT until we see some sign of reversal.”

Along similar lines, Shrikant Chouhan, Head of Equity Research (Retail), Kotak Securities said, “D-street will focus on the macro trends. Markets going ahead may be dominated by global news flows and steps taken by different governments to tackle their economy. On the economy front, minutes of the April MPC meeting highlighted members’ increased concerns about the inflation outlook, while they were optimistic on the growth front.”

Explaining in detail about global trends, Chouhan added, U.S. Treasury yields continue to drop after a round of data indicated that the economy might be contracting. Investors continue to weigh up the Federal Reserve’s monetary policy trajectory, with the market pricing in another 25 basis point interest rate hike at the central bank’s early May meeting. In May’s monetary policy meetings, investors expect the Federal Reserve and the Bank of England to enact one more interest rate hike before pausing. Investors are also reacting sharply to corporate earnings in Europe and US.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.