Earnings to guide markets next week; inflation, pandemic key risks

IT stocks buzzed the most while metal heavyweights also shone. In the broader markets, sugar stocks remained in the limelight as investors expect great strides in ethanol blending in fuel during the next two years.

S Hariharan, Head- Sales Trading, Emkay Global Financial Services, said he anticipates strong results from frontline banks and metals companies and weak results from auto, FMCG and chemicals sectors.

“At the index level, we expect to see strong resistance at current levels and would anticipate a pull-back in the near-term. Strong guidance from many members of the US FOMC about hiking interest rates in CY22, alongside continuing high inflation prints globally, make for an adverse flow environment for equities in general,” he said.

Some IT stocks during the week saw heavy selling, especially Wipro and Mindtree. Analysts said the reaction to strong results from frontline IT names appears to point to heavy pre-positioning in the market and might be a recurring theme for the ongoing results season. Good results are priced in and fresh catalysts may be needed to push the ongoing rally further, they added.

Even as the market saw some selling by the end of the week market breadth was inclined towards the advancing side, thanks to buoyancy in midcap and smallcap space, a trend that was seen during the entire week.

Now, earnings will continue to influence the market mood.

“Markets will first react to the results of two heavyweights- HCL Technologies and HDFC Bank in early trade on Monday,” said Ajit Mishra, VP – Research, Religare Broking.

“We may see further consolidation in the index however the bias would remain on the positive bias. Participants should continue with the ‘buy on dips’ approach and focus on sectors that are trading in sync with the benchmark.”

The biggest risk to the market at this juncture are sharply rising Covid-19 cases in the country that threatens further curbs on movement and businesses, and rising inflation in the US and back home.

“Fed official’s latest comment on a likely rate hike during March triggered selling in global equities. Globally, inflation worries worsened after the US reported a 40 year high CPI inflation reading while a slower rise in producer prices provided some relief,” said Vinod Nair, Head of Research at Geojit Financial Services.