Week Ahead: Earnings to be major driver for Street; 10 factors to keep an eye on




Uttaresh Venkateshwaran

Moneycontrol News

The market set a fresh record closing high on Friday, driven by a further rally in banks in late trade, especially after PNB reported strong earnings and asset quality improvement. It was partly driven by global cues.

The 30-share BSE Sensex was up 112.34 points at 33,685.56 while the 50-share NSE Nifty ended above 10,450 level for first time, rising 28.70 points to 10,452.50.

“We’re reiterating bullish view and suggest following the trend. We will review target at 10,600 in Nifty,” Jayant Manglik, President, Retail Distribution, Religare Securities said.

Almost all the sectors are contributing in the rally now but one needs to be selective, citing the ongoing earnings season, he advised.

Nikhil Kamath, Co-Founder and Head of Trading, Zerodha also foresees the bull trend continuing in the near future. “The results season looks to have turned to the positive, overall outlook for the economy is also again changing to the positive. Domestic inflows continue to be robust, whereas FII activity remains lackluster,” he reasoned.

For the week, the Nifty gained 1.25 percent and the Sensex increased 1.6 percent while Nifty Midcap rose 2.3 percent.

Going forward, one of the major triggers that the Street could watch out for is the earnings season. Names like State Bank of India, M&M, Aurobindo Pharma, Tata Motors and RCom, among others are set to announce their earnings. On the global front, while North Korea tensions seem to have steadied for now, the Street will still be cautious on any statements from either Washington or Pyongyang could keep it on its feet.

Earnings

With the earnings season in its thick phase, the Street shall await data from the upcoming results this week. According to experts, the market has been waiting for some kind of earnings growth to justify the valuations that they are trading at. So far, they added, the numbers have not disappointed and have been steady.

In the upcoming week, over 800 BSE companies will be declaring their results between November 4 and November 11, 2017.

Among the big and popular names include Inox Wind, Motilal Oswal Financial Services, Century Textiles & Industries, Fortis Malar Hospitals, Housing And Urban Development Corporation, Just Dial, Narayana Hrudayalaya, Torrent Power, Varun Beverages, Welspun Corp, Westlife Development, Aditya Birla Capital, Cipla, Future Retail, Jyothy Laboratories, MAS Financial Services, Mahanagar Gas, Snowman Logistics, Aurobindo Pharma, India Cements, Tata Motors, V-Mart Retail, Bosch, Mahindra & Mahindra, State Bank Of India, and Reliance Communications, among others.

IPO and Listing

In the primary market action, another company will hit the exchanges—HDFC Standard Life on November 7. It would be interesting to watch the kind of response this insurer gets after the performances of GIC Re and SBI Life, among others.

Meanwhile, the Street will also watch out for actions on the new listing front. Reliance Nippon Life Asset Management’s shares will make their market debut on Monday, making it the first AMC to list on Indian exchanges.

Corporate Action

Among corporates several companies will be meeting to declare their dividends and their record dates as well. For instance, companies such as Supreme Industries, Gillette India, Dabur, Mastek, Symphony Industries, Godrej Consumer Products and Power Finance Corporation, among others, will be ex-dividend, among others. The Street could take a note of that development and the stock could react accordingly.

Meanwhile, a company such as Indraprastha Gas (IGL) could also be in focus as the company goes ex-split from Rs 10 apiece to Rs 2 per share.

Stocks in Focus

The Street could keep a few stocks in focus on the back of developments after the close of market hours on Friday.

The Enforcement Directorate issued summons to Saregama Music and T-series for not alleged money laundering charges. The ED registered a case under the Prevention of Money Laundering Act.

A few of the infrastructure companies could also be on investors’ radar after the National Highways Authority of India’s (NHAI) decision. The National Highways Authority of India (NHAI) has terminated 20 road development contracts citing default. NHAI has also barred some major infra players from bidding for highway projects in the next 2-3 years for public-private partnership (PPP) projects and engineering, procurement, and construction (EPC) projects, which received major funding from the government.

The companies that are barred include L&T, Hindustan Construction Company (HCC), Essel Infra Projects, MBL Infra, JKM Infra, Madhucon Toll Highways, Supreme Infra, Transtroy India and others. These firms have been given time till November 6 to make representation before NHAI.

Meanwhile, Unichem Labs and Torrent Pharma will be in focus after an acquisition was announced by Torrent Pharma post market hours on Friday. The deal is said to be for a consideration of Rs 3,600 crore.

Titan could be in focus after it reported robust performance for the quarter ended September 2017 as consolidated profit showed a whopping 67.4 percent growth, driven by jewellery business. Its profit for the quarter increased to Rs 278 crore, from Rs 166 crore in corresponding quarter last fiscal.

Global Cues

On the global front, news from North Korea is likely to be on investors’ radar even as the Street looks to price in any untoward events. US President Donald Trump will also leave for a multi-nation tour.

Apart from that, cues are largely muted as global markets too look to focus on domestic earnings and macro data as well.

Technical Factors

Technical experts highlight that the candle formation on charts indicate a positive move on the market, but a small correction is likely too.

“In the coming week, if Nifty trades and closes above 10,484 levels then it is likely to test 10,525-10,565-10,612 levels. However, if the Nifty trades and closes below 10,420 level then it can test 10379 – 10339 – 10292 levels.

SBI earnings in focus

The September quarter results for State Bank of India will be out later this week. The index heavyweight’s numbers will be tracked by the Street and this will be the second quarter after the amalgamation of associate banks has taken place. The bank had reported a 20.4 percent de-growth in standalone profit at Rs 2,005.53 crore, dented by higher provisions. Asset quality including subsidiaries also worsened further. Standalone net interest income grew by 22 percent to Rs 17,606.01 crore compared with corresponding quarter of previous fiscal. Standalone numbers included SBI and its associate banks (that merged from April 1, 2017) while consolidated numbers include banking as well as other businesses (insurance, other banking operations etc).

Tata Motors Results

Though the previous quarter was saved largely due to a one-time gain, Tata Motors’ Q2 show will be watched by investors, which are likely to factor in festive demand as well. Investors will keep a note on the results of this stock.

Its first quarter earnings missed analysts’ expectations on all parameters on Wednesday. One-time gain related to JLR pension plan boosted profitability but excluding that one-off item, it would have been in a loss due to forex losses. Consolidated profit grew sharply by 41.6 percent year-on-year to Rs 3,200 crore, driven by one-time gain of Rs 3,609 crore relating to recent changes designed to improve the sustainability of JLR’s defined benefit pension plans.

L&T results

Amid talks of a push to infrastructure companies, the market will also await results from L&T for the September quarter as operationally, the company had posted a subdued quarter.

The index heavyweight’s results matched analysts’ expectations on bottomline as well as topline front but operational numbers in Q1 missed estimates. Profit during the quarter grew by 46.4 percent to Rs 892.5 crore in the quarter ended June 2017, aided by lower tax that has fallen 16.2 percent YoY. Revenue rose by 9.7 percent to Rs 23,990 crore year-on-year, driven by infrastructure business that contributed 44 percent to total revenue.

Macro Data

On the domestic front, money supply data will be declared later during the week, which will help in understanding the liquidity situation in the country. Over and above this, global cues will also be in focus. Data for European PMI (services and manufacturing), Chinese imports, US crude imports, and CPI data for China, among others will also be declared this week.