Market Ahead Podcast, July 26: Top factors that could guide markets today

Ongoing earnings season, global trends and US Fed policy meeting will guide the markets this week, believe analysts. Besides, volatility could remain high in the market due to the scheduled derivatives expiry of July month contracts, they said.

The domestic markets had ended the holiday-shortened last week 0.4 per cent lower, bogged down by the concerns over economic recovery and delta variant of Covid. Although strong Q1 earnings helped cap losses.

This week too, the earnings season will be in full swing with nearly 400 companies slated to post their quarterly performance, including some of the prominent names like Axis Bank, Kotak Bank, L&T, Tata Motors, Maruti, Colgate, Tech Mahindra, BHEL, IOC, Sun Pharma and Indigo.

Furthermore, investors will keep a close watch on the US Federal Reserve's monetary policy meeting scheduled for July 27-28. While there is no change in policy expected, more discussion and clarity on tapering is likely.

That said, there will be no dearth of action in the primary market with two initial public offers lined up this week. The IPO by Glenmark Lifesciences will open between July 27-29. The issue priced at Rs 695-720 per share looks to raise Rs 1500 crore. Another IPO, this one by Rolex Rings will run between July 28-30 and comprises fresh issue of Rs 56 crore and an offer for sale of up to 75 lakh shares.

Meanwhile, the country's Covid caseload is receding but the fears of a third wave and the spread of Delta and Delta plus variant loom. Investors will continue to keep a close track of Covid-19 trends.

Lastly, FII flows, oil price movement and the rupee's trajectory versus the US dollar can also sway market mood.

And now, let's take a look at the trade setup for today.

Asian shares struggled to rally in early trade as super-strong US earnings sucked funds out of emerging markets and into Wall Street. Nasdaq futures were up 0.1 per cent in early trade while S&P500 futures were steady.

Japan's Nikkei bounced 1.6 per cent in early trade but was off a seven-month low. Hong Kong dropped about 2 per cent, South Korea's Kospi was down 0.3 per cent and Australia’s S&P/ASX 200 index increased 0.2 per cent.

Apart from global cues, the Street would also react to the Q1 earnings by RIL, ITC and ICICI Bank among others in early trade today. Around 7.50 am, SGX Nifty was down 85 points at 15,770, indicating a weak start for benchmark indices.

In stock-specifc action, Axis Bank, DLF, L&T, SBI Life, Tata Motors, and Vedanta are among the 43 companies slated to report their Q1 results today.

Due to a disrupted April-June quarter (Q1FY22) amid the second wave of Covid-19, analysts expect L&T’s net profit to decline up to 60 per cent sequentially. Besides, Q1FY22 also saw a further rise in commodity prices, leading to further aggravation of pressure on gross margins.

Meanwhile, analysts believe Tata Motors could report a net loss of up to Rs 2,010 crore in Q1FY22 due to subdued sales and commodity cost pressures.

Further, Mukesh Ambani-led Reliance Industries reported a consolidated net profit of Rs 12,273 crore for the three months ended June 30, 2021 (Q1FY22), down 7.2 per cent from Rs 13,233 crore posted in the same period last year (Q1FY21). However, last year's June quarter profit included an exceptional gain of Rs 4,966 crore. This will mean a 48.4 per cent growth in adjusted profit after tax over last year's Rs 8,267 crore.

ICICI Bank reported a 78 per cent YoY rise in standalone net profit at Rs 4,616 crore for June quarter compared with Rs 2,599 crore in the same quarter last year.

ITC reported a 28.6 per cent YoY growth in standalone profit at Rs 3,013.5 crore for Q1FY22, partly driven by low base in the year-ago quarter.