Corporate results to drive stock market in coming weeks

The broader market represented by the Bombay Stock Exchange (BSE) Sensex opened for the week at 26,271 and closed flat at 26,297, more or less flat, albeit amid volatile trading. The week was marked by various events: RBI's monetary policy review, US Fed's reaffirmation of maintaining interest rates at current levels and results declared by IT behemoth Infosys.

The Reserve Bank of India's (RBI's) September monetary policy meeting kept all rates unchanged - the repo rate at 8%, reverse repo at 7% and statutory liquidity ratio (SLR) at 22%. Although the rate decision was in line with expectations, the market focus was on the RBI's CPI inflation forecast, which could be sticky.

The market on Thursday gained almost 250 points. According to Shrikant Chouhan, Head of Technical Research, Kotak Securities, more than this the best part is that our markets moved up mainly because of strength in cyclical stocks/sectors like banks, metals, infrastructure and capital goods. "The new economy sectors/defensive sectors remained under the pressure of profit taking but we feel it's a healthy signal for the market," he adds.

However, Friday saw a fall in the index of 340 points (-1.3%), while the Mid-cap Index fell 1.4%, despite moderately good number by IT behemoth Infosys. The fall was triggered by correction in international commodities and fear of deterioration in Europe and China.

"The lack of foreign flows resulted in subdued sentiments," says Dipen Shah, Head of Private Client Group Research, Kotak Securities.

According to Alex Mathews, Head Research, Geojit BNP Paribas Financial Services Ltd, the markets remained under pressure tracking the global peers on concern a slowdown in Europe may hurt global growth. As a result we could see higher impact in companies linked with resource prices, business mix and outlook in global economy.

The Mid-cap Index lost 1.4%, Tata Steel, Sesa Sterlite, Hindalco and Tata Motors, for instance, lost 4% to 6% each, in a day. Meanwhile, Infosys gained 6.7%, led by impressive results, reporting a 28.6% rise in its consolidated net profit as compared to a year ago period and the consolidated revenue was also up 2.9%. An interim dividend of Rs 30 per share was declared and recommendation of a bonus issue of one equity share for every equity share held.

The top gainers for the week amongst Group A stocks were NCC (+20%), Strides Arcolab (+18%), Apollo Tyres (+15%), Page Industries (+15%) and Jet Airways (+15%). While the top losers amongst group A companies were Rasoya Proteins (+40%), Kailash Auto Fin (-27%), Jindal Steel and Power (-15%), PVR Ltd (-11%) and Mindtree (-11%). Further, Rajesh Exports, ABB, Suzlon, Sesa Sterlite and Motherson Sumi lost 9% each.

Going forward, the quarterly results will dictate stock-specific action. Infosys has started the season on a positive note.

"Markets will eagerly look forward to important reforms decisions from the government (eg. Coal linkages, gas pricing, etc), which will provide further impetus to the domestic investment and infrastructure related sectors", says Shah of Kotak. Positive news on these fronts will improve sentiments and allow markets to seek higher levels.

In fact, Chauhan feels that next three months will be the months of cyclical to perform and in that if Nifty breaks 8,180 (7,860 as on October 10) along with the participation of cyclical stocks then it can easily move to 8,500 or 8,600 by the end of December 2014.

In the near term indices will face resistance at 8,030/27,250. Supports are at 7,935/26,465.