Indian Markets Outlook for the week (09 - 13.07.2012)

[rupeedesk]

Indian Markets Outlook for the week (09 - 13.07.2012)

Key indices are likely to move in a thin band early next week as investors will stay on the sidelines before the Apr-Jun earnings of Infosys and Tata Consultancy Services on Thursday. Aution ahead of industrial production data for May, which is also due on Thursday, will keep volumes low and trade choppy. Yesterday, the combined turnover in the cash segments of the BSE and National Stock Exchange was around 119 bln rupees versus 130 bln rupees on Thursday. As the earnings season begins, expecting a poor show from India Inc, which is plagued by weak demand environment and high interest cost. The headline profit growth for 1QFY13 (Apr-Jun) for Sensex companies is likely to be 13.7%. Secondly, sales growth is expected to start dragging earnings while margins stabilize at lower levels, aggregate Sensex (operating) margins are expected to show a drop of 115bps (basis points) to 16.7%.

In particular, energy, metal, and telecommunications companies are likely to report a fall in margins. On Monday, overseas markets will lend cues to investors. US index futures were trading weak ahead of June non-farm payrolls data later yesterday. The Nifty holding above the key 5300 level is likely to keep the index positive in coming sessions. However, any negative surprises from Infosys or TCS in their Apr-Jun results could lead the index to slip below its key support of 5250. We see 5200-5400 as the broad trading range for the index next week. Stocks of information technology companies are likely to remain subdued for most part of the week as investors will assess the results of sector leaders Infosys and TCS before taking any significant positions. Also, more than the quarterly results, outlook of the two companies on demand will be keenly eyed. We fear that Infosys, which had cut its revenue outlook in April, may again lower its projection. In April, the company had said it expects dollar-denominated revenue to grow by 8-10% in 2012-13 (Apr-Mar) compared with expectations of 11-14%. Any negative surprise from Infosys or TCS in the demand environment could lead to a de-rating of not only their stocks but the entire technology sector. Apart from Infosys and TCS, IndusInd Bank and Housing Development Finance Corp will be in focus next week as they release their Apr-Jun results.

By RUPEE DESK

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