Markets To Look At WPI, Corporate Earnings

Indian markets on Friday ended low, dragged down by the Infosys results. There was other key data released on Friday but that didn’t seem to reverse the downward direction of the markets. HDFC Bank results turned out to be impressive, IIP for August came out to be 2.7 per cent as against the expected 1 per cent and CPI for September 2012 came in at 9.73 per cent as compared to 10.03 per cent for August 2012. Though CPI and IIP was better than expectations, the Sensex ended the day lower by 19.57 points at 18675.18, down by 0.69 per cent and the Nifty closed lower by 32 points at 5676.05, down by 0.56 per cent.

This week’s direction in the U.S. markets is likely to be defined by corporate results. Managements’ outlook on the scenario would be something that investors would be keeping a keen eye on. There was increased pessimism lately over earnings but so far, off the companies that have posted results, many of them have been better than expectations. Of the 34 S&P 500 companies that have reported third-quarter results so far, nearly 59% beat earnings estimates; almost 18% reported earnings in line with expectations and close to 24% came in below expectations, according to Thomson Reuters. This has eased some off the negative outlook but markets saw a mixed closing, depending on how results have been.

Europe on Friday closed heavily in the red with the FTSE, DAX and CAC ending the day lower by 0.63 per cent, 0.68 per cent and 0.72 per cent respectively. This downfall has been spurted due to increasing concerns over global economic data. Asian markets today have opened flat to negative. The Hang Seng is currently trading a tad positive due to inflation data while the Shanghai has been inching lower due to a rise in consumer prices. The Shanghai Composite and Nikkei are trading lower by 0.09 per cent and 0.15 per cent respectively.

On the domestic front, markets are likely to track the WPI data closely, that is to be released today. With the CPI easing a little, investors would look at WPI with a view that easing would increase the chance of a rate cut from the RBI. As of now, there is expectation of the WPI to come in lower, following the trend that the CPI has.

Apart from this macro data, results of heavyweights are expected to give some definition to the markets. Among big companies that would announce results and make markets move significantly are Axis Bank and RIL.

Markets seem to be in a consolidation phase and heightened expectations over rate cuts and policy actions combined with corporate earnings may bring pressure on the markets.