Markets Likely To Correct, Earnings To Define Direction

After Friday’s rally seen in the Indian markets, investors are likely to see some correction today on opening. This is likely on account of the U.S. markets seeing heavy losses on Friday post the Indian market’s trading hours. Though the closely watched jobs data in the U.S. came in positive, the markets worldwide have been taking a step backwards ahead of the U.S. presidential elections.

Moreover, domestically, a lack of cues that would cause an upward movement may result in attention being focused more on corporate earnings. Thus, after the mild corrective opening today, the course for the week ahead is likely to be decided upon by the quarterly earnings of the heavyweights.

On Friday, the Indian markets saw a rally of around 1 per cent on account of positive data from the U.S. Last week there was a range of data released on various fronts of the American economy which, overall, was indicative of the economy to be on the path of recovery. The last of this data release spree and the most closely watched was the jobs’ data in which the unemployment rate was seen at 7.9 per cent as against the previous reading of 7.8 per cent. This was in line with the expectations and the markets took it positively, considering that any reading below 8 per cent would be beneficial to the Barack Obama government, thus indicating that his policies have been working well and as intended.

Moreover, the government data showed an addition of 1,71,000 people to the payrolls, beating the expectations and higher than last month’s reading of 1,48,000. Though the data has been positive, the American markets erased the early gains and ended the day losing between 0.64 per cent and 1.26 per cent.

On the other hand, the European markets gained on the back of positive data from the U.S. and the FTSE, DAX and CAC ended the day in the green by 0.12 per cent, 0.39 per cent and 0.48 per cent respectively. The Asian markets, however, have been slipping ahead of the elections and after the sell-off seen in the U.S. markets.

While equities have been bouncing around for a while over uncertainty, gold has been on a positive spree ahead of Diwali. It has yielded healthy returns since the previous Diwali and continues rising on the back of increased demand. Crude, though, has seen some stability on account of a struggle between demand and supply. The futures saw a downfall of 2.34 per cent with the price reaching USD 104.88 to the barrel.

Taking all this into consideration, the individual stocks are more likely to decide the market direction this week. Among the major companies to announce their quarterly results this week are Bharti Airtel, Cipla, Coal India, Dena Bank, Godrej Industries, Hindalco, Indraprastha Gas, NMDC, ONGC, Ranbaxy, SBI, Sun Pharma, Reliance Infra, Reliance Power, Tata Motors, Tata Power and Tech Mahindra, among others. Apart from these, the U.S. presidential elections and policy changes are also likely to be definitive when it comes to market direction.

Today, we expect the markets to see a tepid start and a mild corrective phase based on the rally seen on Friday in the Indian markets and the sell-off witnessed in the U.S. markets.