Rupee, Infosys results, global cues to dictate stock market trend

After an impressive 2014 for the Indian equity market that jumped 30 per cent, the year 2015 would depend on foreign money flows and government reforms. The budget would be the next big trigger for the market on expectations government reform will increase investments into India.

On the domestic front, if the investment cycle doesn't pick up it would be a matter of time that the India story fades away. Already, captains of India Inc have been complaining of consumption slowing and the environment not suitable for investments. Until government spending doesn't come by, it would be difficult to expect investments from corporate India.

There could be hopes of announcement of reforms for the banking sector after the two-day Banker Retreat called Gyan Sangam that was held on January 2 and 3 in Pune. The objective of this retreat was to create a platform for formal and informal discussions among government with the RBI and chiefs of PSU banks around the issues which are important for banking sector reform.

In the near term the Indian rupee will be key for the market. Weakness in the rupee in the past few days due to profit booking by foreign investors and year-end demand from importers has seen the local currency falling to 63.79 a dollar before recovering on Friday, January 2, to close at 63.47 a dollar. In the past one month, the rupee has weakened by three per cent.

Though the rupee has weakened in the past one month, it has remained the most stable currency in 2014. Foreign money flow would be key for the rupee as well as Indian equity market. Last year foreign investors invested over $42 billion in both equity and debt markets. The immediate trigger for the markets will be foreign flows in January and the Budget towards the end of February. The market will also hope the Reserve Bank of India (RBI) cuts interest rates.

Corporate results for the third-quarter ended December 2014 will be keenly watched. On January 9, software giant Infosys will announce its third-quarter results. Overall expectations are that the base effect of 2013 is expected to spoil the party for India Inc and some believe this will be a bad quarter for the companies. The earnings season ends in the second week of February 2015.

The week will also be impacted by global events especially in the euro zone. The Bank of England will hold monetary policy committee meeting on Thursday, January 8. The market will also keep an eye on the US, which will unveil its ISM Service PMI data for December 2014 on Tuesday, January 6. On Friday, January 9, the US will also announce its unemployment rate and non-farm payrolls data for December.