www.rupeedesk.in
Benchmark stock indices are likely to take cues from overseas markets, and Oct-Dec earnings of Indian companies next week. US futures were trading nearly flat yesterday, ahead of employment data for December, due later. Back home, Gujarat NRE Coke, IndusInd Bank, and Sintex Industries will report their quarterly numbers next week, but among large-caps, the first one to detail its earnings will be Infosys, on Jan 11. India's industrial production for November, which will also be announced on Jan 11, will be a key sentiment driver. In the days up to Jan 11 though, most traders expect the market to consolidate, much like it has in the past two sessions.
They blame the lack of strong upside, despite the National Stock Exchange's 50-share Nifty closing above the psychological 6000-mark for two straight sessions, on the absence of significant triggers and dull participation from foreign institutional investors. Yesterday, the NSE Nifty ended at 6016.15 points, up 6.65 points or 0.1% from Thursday. The BSE's 30-share Sensex closed at 19784.08, up 19.30 points, or 0.1%. If Nifty continues to hold onto 5960 then higher levels like 6100 and 6150 would become possible before any meaningful correction. Among stocks, information technology stocks will largely align themselves according to movement in the rupee and earnings expectations from the sector.
With higher-than-expected impact of delays in decision-making and client shut-downs in 3Q (Oct-Dec), we expect Infosys to reduce the organic annual revenue guidance marginally. Infosys' management had reportedly told in December that the company's 5% revenue growth guidance for 2012-13 (Apr-Mar) could be at risk. We expects IT companies' operating margins to decline sequentially in Oct-Dec due to rupee appreciation and lower utilisation rates, and revenue growth to be limited to 2.5-2.9% quarter-on-quarter partly due to impact of hurricane Sandy. We remain overweight on the sector on stabilising demand in the US and a large number of global IT outsourcing deals coming up for renewal in 2H (Jul-Dec).
Among large-caps, we expects Tata Consultancy Services and HCL Technologies to outperform peers. Among mid-caps, it prefers Persistent Systems, Infotech Enterprises and CMC due to likely strong earnings growth in 2012-13. Stocks of state-owned oil marketing companies Bharat Petroleum Corp, Hindustan petroleum Corp, and Indian Oil Corp may remain buoyant as the government is considering deregulating diesel prices. The move may significantly reduce under-recoveries for these companies, though a rise in crude oil prices and weakness in the rupee remain key risks. Among others, L&T Finance Holdings, Mahindra & Mahindra Financial Services, Bajaj Finserv, and Aditya Birla Nuvo, which are seen as contenders for new bank licences, may also remain active on news the Reserve Bank of India may issue norms for the same before Jan 29. However, profit sales may drag Manappuram Finance and Muthoot Finance down after the two posted double-digit gains in the past two sessions on the RBI working group's proposal to hike the loan-to-value ratio.
Benchmark stock indices are likely to take cues from overseas markets, and Oct-Dec earnings of Indian companies next week. US futures were trading nearly flat yesterday, ahead of employment data for December, due later. Back home, Gujarat NRE Coke, IndusInd Bank, and Sintex Industries will report their quarterly numbers next week, but among large-caps, the first one to detail its earnings will be Infosys, on Jan 11. India's industrial production for November, which will also be announced on Jan 11, will be a key sentiment driver. In the days up to Jan 11 though, most traders expect the market to consolidate, much like it has in the past two sessions.
They blame the lack of strong upside, despite the National Stock Exchange's 50-share Nifty closing above the psychological 6000-mark for two straight sessions, on the absence of significant triggers and dull participation from foreign institutional investors. Yesterday, the NSE Nifty ended at 6016.15 points, up 6.65 points or 0.1% from Thursday. The BSE's 30-share Sensex closed at 19784.08, up 19.30 points, or 0.1%. If Nifty continues to hold onto 5960 then higher levels like 6100 and 6150 would become possible before any meaningful correction. Among stocks, information technology stocks will largely align themselves according to movement in the rupee and earnings expectations from the sector.
With higher-than-expected impact of delays in decision-making and client shut-downs in 3Q (Oct-Dec), we expect Infosys to reduce the organic annual revenue guidance marginally. Infosys' management had reportedly told in December that the company's 5% revenue growth guidance for 2012-13 (Apr-Mar) could be at risk. We expects IT companies' operating margins to decline sequentially in Oct-Dec due to rupee appreciation and lower utilisation rates, and revenue growth to be limited to 2.5-2.9% quarter-on-quarter partly due to impact of hurricane Sandy. We remain overweight on the sector on stabilising demand in the US and a large number of global IT outsourcing deals coming up for renewal in 2H (Jul-Dec).
Among large-caps, we expects Tata Consultancy Services and HCL Technologies to outperform peers. Among mid-caps, it prefers Persistent Systems, Infotech Enterprises and CMC due to likely strong earnings growth in 2012-13. Stocks of state-owned oil marketing companies Bharat Petroleum Corp, Hindustan petroleum Corp, and Indian Oil Corp may remain buoyant as the government is considering deregulating diesel prices. The move may significantly reduce under-recoveries for these companies, though a rise in crude oil prices and weakness in the rupee remain key risks. Among others, L&T Finance Holdings, Mahindra & Mahindra Financial Services, Bajaj Finserv, and Aditya Birla Nuvo, which are seen as contenders for new bank licences, may also remain active on news the Reserve Bank of India may issue norms for the same before Jan 29. However, profit sales may drag Manappuram Finance and Muthoot Finance down after the two posted double-digit gains in the past two sessions on the RBI working group's proposal to hike the loan-to-value ratio.
