Week Ahead: Upbeat RIL earnings to set the tone

Benchmark shares indices rebounded in last two trading sessions, amid a rallly in global stocks, to end higher for the third straight week on expectations that the US Federal Reserve won't raise interest rates soon. Banks which are a proxy to the economy led the gains amid strong August IIP data while auto stocks rallied on hopes of higher demand in the festive season even as IT majors declined post their earnings announcement.

In the week to October 16, the 30-share Sensex ended up 0.5% at 27,215 and the 50-share Nifty ended up 0.6% at 8,238.

“Markets ended the week on a positive note on the back of receding concerns about an early US rate hike. Supporting global markets also helped. The better-than-expected IIP numbers supported sentiments of growth improving in the domestic economy. Emerging market funds have seen flows after several weeks and that indicates growing interest of investors in EMs and particularly, towards India. Improvement in private sector capex will likely result in better earnings growth and valuations for the relevant sectors.” said Dipen Shah, Head of Private Client Group Research, Kotak Securities.

A host of economic data was released during the week under review. Industrial Production in August 2015 increased by 6.4% compared to 4.2% growth registered in the previous month and 0.5% in August 2014.

Consumer price index-based inflation for September reversed a two-month declining streak and rose 4.41 per cent year-over-year, because of higher food retail prices. Retail inflation for August was 3.74 per cent and for July was 3.69 per cent.

Wholesale Price Inflation eased for the eleventh straight month in September which stood at -4.54 per cent compared with -4.95 per cent in August.

India’s merchandise exports fell for the 10th consecutive month in September. Exports declined 24.3 per cent to $21.84 billion in September 2015 compared with $28.86 billion in September 2014.

Tata Motors had a stupendous rally for the third straight week. The company said the Group's wholesales in September 2015 including Jaguar Land Rover surged 21% over September 2014.

Other stocks too were in high gear with launch of new models ahead of the festive season. Maruti Suzuki gained 4.1%, M&M rose 1.6% while Hero MotoCoro and Bajaj Auto ended higher.

Reliance Industries continued to gain throught the week ahead of its September quarter earnings. The company after market hours on Friday surprised the street reporting a 12.5 per cent rise in consolidated net profit at Rs 6,720 crore for the quarter ended September amid high refining margins. Gross refining margin (GRMs) for the September quarter stood at $10.6 a barrel, against $8.3 a barrel in the same period last year.

Metal stocks continued to sparkle amid rising global commodity prices while strong industrial growth in August led to renewed buying interest in capital goods shares like L&T and BHEL.

Hindustan Unilever slipped 4% after it reported a marginal drop of 2.6% in net profit at Rs 962 crore for the quarter ended September 2015 impacted by price deflation, especially in the soaps and detergents segment as against Rs 988 crore in the same period a year ago.

IT major Infosys and TCS were the top Sensex losers post their earnings announcement.

Infosys ended down 6.3% after it cut its dollar revenue estimated for the current fiscal. The company said that for the fiscal year ending March 31, 2016, revenues are likely to rise by 6.4% - 8.4%, down from a previous estimate of 7.2% - 9.2% in dollar terms.

TCS ended down 5.9% after it reported lower-than-expected constant currency revenue growth for the fourth straight quarter. Continued weakness in its Japan-based insurance arm Diligenta and energy business weighed on the IT major's topline. Revenue during the September quarter stood at Rs 27,165 crore as against a consensus Bloomberg estimate of 27,229 crore. Revenue in dollar terms grew sequentially by 3% to $4,156 million which was lower than the Street's estimate of around 4%.