Investors remained cautious about IT scrips during the week ahead of results for the July-September quarter. The CNX IT lost 60.03 points or 0.5% during the week. (Express Photo)
Positive domestic and global cues helped benchmark indices close 3% higher this week, as the markets ended in the green for the second straight week. In the previous five trading sessions, the Sensex gained 858.56 points or 3.27%, while the Nifty was up by 238.8 points or 3%.
Pick-up in global commodity prices helped metal scrips recover from the declines made during the last three weeks. The CNX Metal index advanced 11.15% during the week. Prices of aluminium and zinc went up by 3.9% and 8.6%, respectively, while those of copper gained 4.2% on the London Metal Exchange during the week. Price of crude oil crossed $50 per barrel mark, heading towards its biggest weekly gain in the last three months.
The 50 bps reduction in the repo rate by the Reserve Bank of India (RBI) during the bi-monthly policy meet on September 29 helped banking shares advance during the week, with the CNX Banks index gaining 2.56%.
The rally would, however, be short-lived, experts said. “I don’t think (the) worst is yet to get over for banking sector in India. Due to deflationary pressure, the pain is likely to continue going forward. Even the issue of non-performing assets (NPAs) is not going to be sorted out in the next three quarters,” said Gopal Agrawal, CIO at Mirae Asset Global Investments (India).
Investors remained cautious about IT scrips during the week ahead of results for the July-September quarter. The CNX IT lost 60.03 points or 0.5% during the week. Shares of HCL Technologies have shrunk by more 11% since the company issued a revenue warning stating that the Q2FY16 profits might not be in tune with market expectations. Many domestic and international brokerages have suggested that Q2FY16 will be a strong quarter for IT companies due to seasonal strength and favourable moves in key currencies including the US dollar. “We expect a healthy quarter for top IT companies as they are expected to post a constant currency growth of 2.4-4.6% quarter on quarter,” said Kawaljeet Saluja, head of research, Kotak Institutional Equities.
The US monthly payroll data which was released earlier during the week was lower than expected, making a immediate rate hike by the US Federal Reserve unlikely. Foreign portfolio investors (FPIs) turned net buyers during the week as they bought shares worth $272 million, Bloomberg data showed. FPIs sold equities worth $2.5 billion during the quarter ended September, making it the worst quarter for FPI outlfows in nearly seven years.
The performance of markets would depend on the corporate earnings for Q2FY16, experts said. Brokerages have already predicted a flat-to-negative earnings season. “ Corporate performance during Q2FY16 will continue to tread low for fourth consecutive quarter. The demand conditions, both domestically and globally, remained weak as indicated by sharp decline in exports growth, disinflationary trend in manufacturing and subdued credit growth. However, depreciation of the rupee during the quarter can provide some impetus at the margin,” said Dhananjay Sinha, head of institutional research, Emkay Global Financial Services.
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