Q3 results, Covid cases among key factors that will steer market this week

Hopes of better than expected earnings from India Inc during December quarter and bottom fishing pushed indices higher but selling at high levels at the end of the week suggests the market may not be out of the consolidation phase.

This week is going to be critical for equity market as the earnings season is about to begin. The focus is on the IT pack as IT majors like Infosys, TCS, Wipro, HCL Tech and Mindtree would announce their numbers. Besides, the result of banking heavyweight, HDFC Bank, is also scheduled.

On the macroeconomic front, participants will be eyeing IIP, CPI Inflation and WPI Inflation data also during the week. Amid all, global cues and updates on the Covid situation would remain on the participants’ radar.

“We believe earnings will dictate the market trend now and participants are hopeful of an encouraging start by IT heavyweights. We reiterate our positive yet cautious view and suggest focusing more on risk management as volatility is likely to remain high,” said Ajit Mishra, VP Research, Religare Broking.

Here are key factors that may guide market this week:

Q3 Earnings
With a number of IT and banking majors scheduled to report their earnings during this week, the earnings season will formally begin. TCS, Infosys, Wipro, HCL Tech, HDFC Bank – all Nifty50 constituents – will report their quarterly results on Wednesday. Besides these, Delta Corp, Mindtree and Tinplate are among other names that will report their numbers.

Covid-19 Cases
India has entered a full blown third wave of the pandemic, primarily led by Omicron variant that threatens to upend the recovery in economic activity during the last one year. The country is reporting more than a lakh virus cases a day now, though hospitalisation remains low. Nonetheless, cities across the country have started enforcing fresh curbs on movement, which may spook traders. They will keep an eye on further development on this front.

GDP Estimates
The advance estimate of GDP for FY22 released by the Ministry of Statistics and Programme Implementation (MOSPI) is optimistic at 9.2 per cent, considering the supply bottlenecks, coal, power and semiconductor shortages and looming third wave of the pandemic. Traders will also react to this on Monday onwards.

Macro Data
Indian authorities will report retail and wholesale inflation data during the week that will be keenly tracked by investors as it will form the basis for any action or inaction from the central bank. Rising inflation has been a key problem for monetary authorities across the globe, however the RBI has largely been unaffected.

Technical Outlook
Nifty50 index formed a spinning top pattern at 61.8% Fibonacci retracement of the decline from the top. On the other hand, while Bank Nifty remained the top gainer among sectoral indices, the index formed a Shooting Star pattern on the daily chart.

“These formations indicate that both the benchmark indices seem to be facing a mild resistance at current levels. Having said this, the underlying bullish momentum remains intact as long as the Nifty does not break below 17,550 levels. We suggest traders maintain a cautiously bullish outlook as a fall below 17,750 can lead to a retest of previous support of 16,850,” said Yesha Shah, Head of Equity Research, Samco Securities.