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Stock indices are seen trading with a positive bias next week after they ended at a one-week high yesterday but the sustainability of these gains will depend on the outcome of the Reserve Bank of India's monetary policy on Tuesday. According to a Cogencis poll of 40 economists, treasurers, bankers and fund managers, 88% expect the Indian central bank to keep the repo rate unchanged at 7.25% due to uncertainty surrounding the monsoons and timing of the US Federal Reserve's interest rate hike. The rest expect a 25-basis-point cut.
However, on Monday, domestic equities may be range bound owing to weak Apr-Jun earnings from index major Larsen & Toubro. Post market hours yesterday, L&T reported earnings for the quarter ended June which misses analysts' expectations on the net profit and sales front. L&T's consolidated net profit dropped 37% on year to 6.06 bln rupees, missing analysts' estimate of 7.92 bln rupees. Order inflows fell 21% on year to 264.00 bln rupees.
Consolidated net sales at 202.5 bln rupees were up 7% on year but lower than forecast of 203.20 bln rupees. Operating margin declined to 11.3% from 13.2% a year. The company has maintained its order inflow growth and revenue growth guidance of 15% for the current financial year. Yesterday, the stock ended up 1% at 1,791.25 rupees. Apart from L&T's numbers, update on the southwest monsoon forecast on Sunday by the India Meteorological Department will also lend direction to equities on Monday.
Apart from the RBI policy, market participants will track Apr-Jun earnings as well as progress of key bills such as the Goods and Services Tax bill in Parliament next week. On the earnings front,
Bharat Heavy Electricals, Tata Motors, Bharti Airtel, Mahindra & Mahindra, Grasim Industries, Hero MotoCorp and HCL Technologies are the major companies reporting Apr-Jun results next week.
Among sectors, automobile stocks will be in focus as their July sales numbers are released and
public sector banks are seen trading with a positive bias after the government detailed its capital
infusion plan for PSU banks for the next few years. As a lot hinges on RBI policy outcome, market participants peg initial resistance for the National Stock Exchange's Nifty at 8600 points. Looking at the price action and that market has given a closing right near the highs of the week indicates that market is poised to go higher.
Flows from Employees' Provident Fund Organisation which yesterday said that it would start
investing in the equity market from Aug 6, will keep the downside limited in equities. Yesterday, the Nifty surged 111.05 points or 1.3% to close at 8532.85 points and the S&P BSE Sensex jumped 409.21 points or 1.5% to end at 28114.56 points.
