India Inc earnings, taper talks among key factors that may drive market this week

New Delhi: Domestic benchmark equity indices scaled new lifetime peaks last week, thanks to positive domestic sentiments. Despite mixed global cues, Dalal Street traders shunned volatility as buoyancy continued amid the festive season.

Buying was seen in auto, metal, energy and banking sectors. Strong business preview numbers and favourable credit growth data ahead of Q2 numbers boosted the morale further.

India’s September retail inflation fell sharply in August owing to a decline in food prices while wholesale inflation also eased, said Vinod Nair, Head of Research at Geojit Financial Services.

"Global markets were under pressure as inflation due to rising commodity prices and the upcoming earnings season compelled investors to trade cautiously. Inflationary pressure continued in the US, as retail inflation remained high," he added.

BSE Sensex and its broader peer Nifty50 added more than 2 per cent each during the week. Broader indices marched along with the benchmarks as BSE Midcap index soared more than 3 per cent, whereas smallcap index added 2 per cent.

This week, the domestic market awaits the release of quarterly earnings to determine the trend. Though, any deviation from market expectation may lead to short-term correction in the respective segments.

Here are the key factors that may steer the market going ahead:
India Inc Q2 earnings: The quarterly earnings season will gain momentum this week as the domestic market awaits September quarter results of India Inc. With the expectation of a strong recovery in corporate earnings, banking will be the key sector under focus in the coming days.

Companies including Ultratech Cement, L&T, Route Mobile, HUL, Nestle India, ICICI Securities, Havells India, Angel Broking, Jubilant Foodworks, Asian Paints, JSW Steel, IndusInd Bank, IDBI Bank, Hindustan Zinc, YES Bank, HDFC Life Insurance Company and more will announce their Q2 earnings.

RIL results: Mukesh Ambani-led Reliance Industries (RIL) will announce its earnings on Friday, October 22. The market will be keenly watching big announcements from the company related to its telecom, retail, solar and renewable energy businesses.

During its recent annual general meeting, RIL had disclosed its plan to transform its energy business and hinted at creating 4 gigafactories with a $12 billion investment. Lately, the company acquired Norway-based solar panel maker REC Solar Holdings for $771 million. It also bought a 40 per cent stake in Sterling Wilson & Solar for Rs 1,100 crore.

Key economic readings: Amidst the absence of release of domestic key economic data, global macro economic data will be under the lens. The US will announce its crude oil inventories, which is likely to impact the global crude supplies and India's import bill.

Also, the initial jobless claims, US goods and services manufacturing purchasing managers' index (PMI) would be on the radar of market participants, guiding the future course of action.

Energy crisis: The trimmed supply of coal from key hubs in China and India has led to a severe energy crisis. The shortage of gas and coal is triggering extra demand for oil products from the power market, which is likely to push crude higher. The rising demand of energy poses a serious threat to the global economy.

Taper talks: The latest minutes of the Federal Reserve's FOMC meeting hinted towards taper starting in the next couple of months, even as the delta variant continued to create headwinds.

Global markets would be eagerly awaiting speeches of FOMC members scheduled this week. Federal Reserve Bank of San Francisco President and Chief Executive Officer Mary Daly and Federal Reserve Bank of Atlanta President Raphael Bostic will speak at a public event on Thursday.

Vaccination: The rapid pace of vaccination has increased hopes of businesses. India has administered over 96 crore vaccine doses, giving at least one dose to more than half of the population. India is likely to hit the 1 billion mark this week. Traders have high hopes that India might avoid a third wave of coronavirus pandemic.

Festive demand: Domestic equity market participants would be reading between the lines amidst a busy festive season in India. The festive fervour is fueling demand for consumer products and discretionary expenditure and companies are meeting challenges like expansion and additional hiring.

However, high demand in the festive season, workforce shortage and rising fuel prices are some issues that last-mile delivery operators are grappling with even as many of them are forced to go for an increase in the prices of their services.

Inflation concerns: Rising commodity prices is still a concern, though, the market is not considering this fact for the time being. Dollar index and US bond yields eased down a little but the market will have an eye on it in the coming days.

Technical outlook: Nifty50 index formed a big bullish candle and closed the week at a new all-time high. The bullish sentiment is at its peak which is usually considered unfavorable for creating new long positions, said Samco Research in its weekly note.

"The benchmark index is also approaching the rising resistance line, which indicates a limited upside potential in the short term. We suggest traders to not create fresh long positions and wait for mild dips to time their entry better. The immediate support on the downside is now placed at 17,850," it added.