Stock market might remain volatile

Gains were led by index heavyweights Infosys and RIL while metal stocks lost ground

Continuing its winning streak for the fourth consecutive week, markets rose moderately in a truncated week on the back of upbeat quarterly earnings from Reliance Industries and firm global cues after the European Central Bank (ECB) signalled that it would inject more stimulus.

In the week ended October 23, the 30-share Sensex clocked 0.9 per cent gain to end at 27,471, up 256 points, while the 50-share Nifty closed shy of 8,300 to settle at 8,295, up 57 points or 0.7 per cent.

The broader markets underperformed the Sensex. BSE Midcap Index ended at 11,138, up 90 points or 0.8 per cent while BSE Smallcap Index rose 24 points or 0.2 per cent to settle at 11,519.

Market outlook
Rahul Shah, vice-president, Equity Advisory Group, Motilal Oswal Securities, said, “Markets continue to gain momentum this week also. Sensex gained over a half per cent (183 points) to close at 27,471 and Nifty gained 44 points to close two-month high 8,295. However, the market pared its gains for the day’s high. Positive global cues, fall in dollar-rupee exchange and stable oil price lifted the market. The US, Europe and Asian markets surged one to three per cent in two consecutive days, after the ECB president first announced quantitative easing.

He further said, “Market expects that the US Fed might delay rise in interest rate. fast-moving consumer goods (FMCG), banking and oil & gas stocks gained while capital goods and auto stocks declined. Also, the corporate results announced for the Q2 has been in line with the Street estimates and no major disappointments. We believe market next week should continue to gain momentum. Technically, the next resistance level for the Nifty is 8,450.”

Events that shaped the week
The major event that boosted sentiment across the global financial markets was ECB’s indication that it would inject fresh stimulus as early as December to boost the economy.

In an another global event, China’s gross domestic product data showed that the world’s second largest economy expanded at 6.9 per cent in the September quarter — its slowest in six years for the third quarter —  as against 7.3 per cent year-on-year. However, it was slightly better than analysts’ expectations of 6.7 per cent.

Back home, global credit rating agency Standard & Poor’s Ratings Services (S&P) has affirmed its ‘BBB-’ long-term and ‘A-3’ short-term sovereign credit rating on India with stable outlook on the rating. The agency further confirmed, given the current conditions, it is unlikely to modify the ratings on India at least till 2016.

Results impact on stocks
BSE IT Index registered highest gains with nearly three per cent, followed by BSE FMCG and Power indices, up 1.2-1.7 per cent each. On the downside, BSE Auto, Metal and Capital Goods indices were the losers, down between 0.5-3.5 per cent each with the Capital Goods sector the biggest loser.

HDFC Bank gained 0.7 per cent for the week. The bank’s net profit increased 20.5 per cent to Rs 2,870 crore on 24.7 per cent growth in total income to Rs 17,324 crore year-on-year.

Wipro lost 1.5 per cent. The company’s consolidated net profit rose seven per cent to Rs 2,240 crore for the September quarter but the company is forecasting a tepid quarter ahead.

Bajaj Auto rose 2.2 per cent. The company’s net profit surged 57.9 per cent to Rs 933 crore on 2.8 per cent growth in total income to Rs 6,250 crore in the second quarter.

Hero MotoCorp gained at modest rate of 0.3 per cent. The company’s net profit rose 1.13 per cent to Rs 772.06 crore on  nearly 2.4 per cent decline in total income to about Rs 6,940 crore for the Q2 quarter.

Infosys jumped five per cent and was the highest gainer on the Sensex. The IT major has signed an agreement to acquire Noah Consulting, LLC, a leading provider of advanced information management consulting services for the oil and gas industry. Also, it announced collaboration with IBM, in which Infosys will tap Bluemix.

L&T plunged 5.8 per cent. The expectation of its second quarter results remains tepid.  To couple with it, slippage in credit rating for two of its road project and the likely delay in execution of projects in West Asia have also impacted the stock.

The week ahead
The market is expected to remain volatile as traders roll over positions in the futures and options segment from the near month October series to November series. The derivatives expiry is on Thursday, October 29.

Besides, a deluge of Sensex companies would unveil their quarterly earnings next week. Bharti Airtel and Housing Development Finance Corporation are scheduled to announce their earnings on Monday, October 26. Axis Bank, Lupin, Maruti Suzuki and Vedanta on Tuesday, October 27.

Ambuja Cements will announce its earnings on Wednesday, 28 October. Dr Reddy’s Laboratories and NTPC would unveil their results on Thursday, October 29.