The Indian stock market is likely to see highly volatile trade with an upward bias in the coming week, with the trading sentiment to be dictated by the Q3 corporate earnings season, which kicks off when IT bellwether Infosys declares its results on January 12, say analysts.
The stock market may see some advances during the week on hopes that the RBI may cut rates to stoke economic growth as inflation slows, they said.
Industrial production numbers may also have some impact on the trading sentiment this week.
However, marketmen are not bullish on the earnings reports card of corporate India and feel the results are largely set to disappoint as most of the companies have been reeling under the impact of slowing growth and high borrowing costs.
"Against the backdrop of a perceptible slowdown in the macro-environment, India Inc faces another tough quarter as Q3FY12 results estimates point to a tepid 3.3% PAT growth for Sensex companies. Earnings growth for Q3FY12 is likely to be weak," Edelweiss Securities said in a report.
In terms of sectors, IT, consumer goods, pharma and cement are expected to post healthy top-line growth, while growth for metals, construction and real estate firms could be relatively lower, it added.
Infosys and HDFC will announce their third quarter results on January 12 and industrial production numbers will also be declared on the same day.
On market expectations from third quarter numbers, an expert said, "The market is expecting more negative surprises than positives."
Most companies struggled in the third quarter due to rate hikes and a fall in the rupee value, which resulted in tense moments for companies with large foreign borrowings.
However, software exporters may bring some cheer to the market due to the recent fall in the rupee value, experts feel.
"IT companies are expected to reap the benefits of the depreciating rupee against the dollar. While tier-I IT companies are expected to register strong earnings growth, earnings for mid-tier IT companies are likely to be a mixed bag," Angel Broking said in a report.
IT companies are expected to report strong 31.3% y-o-y sales growth, partly aided by the recent sharp rupee depreciation.
On the back of the sharp fall in the rupee against the dollar, the profitability of companies such as TCS, Infosys and Wipro is expected to rebound by a healthy 25.1%, 23.4% and 12.8% year-on-year, respectively, it said.
Traditionally, the third quarter is a weak quarter for IT companies as the number of working days is less compared to other quarters due to the holiday season.
Nevertheless, the markets may open on a positive note on Monday on the back of fresh signs of an improving American labour market, which saw the addition of two lakh new jobs in the month of December, coupled with a decline in the unemployment rate to 8.5%.
