Results Pressure: A Negative Open and a Tight Range

Earning season volatility already seems to have set in. Markets yesterday closed in the black after having remained down for a better part of the day. All action, as I have been saying for the whole of past week or so is largely stock specific. There weren’t many triggers for the market to react to during this period. The focus now is on what kind of a performance India Inc comes up with for the December quarter. Early signs, or premonitions if you may call them so, are about software companies coming up with largely mediocre results. Bigger ones including TCS and Infosys are seen to be missing their earnings targets at least for the financial year to end in March. If not, future guidance from these could lead to a change in mood.

Meanwhile markets in the US too have remained pressured over upcoming results since the beginning of this week. After a rather good start to the New year, they haven’t been able to stand above the black line during this week. Macro worries now seem to be relegated to the background and a more top down approach has gripped markets across the globe. Europe has nothing of its own to worry about. In fact, all that could be worrying about Europe has already been factored in by markets there as well as elsewhere in the world. The European markets are presently tracking the developments in the US and moving accordingly. Yesterday important European market indices including the FTSE, CAC and DAX closed marginally in the red.

Asian markets are trading mixed this morning. After opening in the negative zone, the Nikkei turned slightly positive, but looks lacking strength. China, Hong Kong, Korea and Malaysia are trading on the positive side. But as is the case with Japan, the pull of the bears seems to be stronger than the push of the bulls. The Shanghai Composite, the Hang Seng and the KLSE Composite were all trading marginally up. The Seoul Composite and the Straits Times on the other hand were seen trading in the red.

All this sets the tone for a weaker opening on domestic shores. With the markets already facing pressure of the upcoming results season and taking cues from the US closing yesterday, an additional dose of volatility can easily be assumed for today. Its Asian peers too have followed the same pattern and Indian markets are likely to replicate it in trading for today. They are expected to open on a negative note and trade in a very tight range. Even the SGX Nifty, which is a major indicator for opening trades is signally towards the same. At the time of writing this report the Index was down 7 points. Among the more prominent ones, Indusind Bank is to declare its December quarter result today. Volatility is expected to be on a higher side and this will only get accentuated as more and more big names come out with their December quarter performance as we go ahead into the week.