Stock market focus to shift to stock valuation, global cues, corporate earnings

With the Union Budget out of the way, the focus shifts back to corporate performance and stock valuations in the coming week.

Last week, the Sensex witnessed its biggest weekly fall in 2014 but it was more of a knee jerk reaction to the Budget rather than a considered thumbs down. The market had pinned big hopes from the Budget that saw the Sensex touching an all-time high of 26,190.44, and players offloaded their positions when the Budget didn't meet their expectations.

In fact the Budget has been pragmatic considering the limited resources of the government at present. Though it didn't introduce any big-bang reforms, it focused on fiscal prudence and has given a push to growth and investment, particularly in the housing, power and infrastructure sectors.

The market has even taken in its stride the increase in dividend distribution tax (DDT) which was raised by over 3 percentage points to 20.47 per cent from the earlier 16.99 per cent. This is because there is confidence that the Indian economy will turn around. It is considered the only economy where growth can accelerate and interest rates can come down.

Though the market may continue its downward correction on the back of global weakness as well as the growing crisis at Portugal's bank as there is a worry about contagion, the mood in the Indian market will not change drastically. It's certainly not going to be negative.

Meanwhile, stock valuations are running higher than fundamentals in many cases. These stocks prices may correct. It's not going to be a runaway market and the focus will immediately shift to the June ended quarterly corporate performance with movement being strictly stock specific.

Bajaj Auto, TCS and Zee Telefilms are among the major companies that will announce their result in this week. Similarly, the government will also declare its June 2014 WPI inflation numbers on Monday. Expectations are the WPI will slip below 6 per cent.