Quarter results may guide D-St in near term

Taking support from better than expected Q2 performance by Infosys Tech the BSE benchmark Sensex has gained by over 850 points last week but investors are still cautious over the future prospects.

The market, shrugged off lower industrial production data and higher food as well as headline inflation close to double digit. Infosys Tech helped the Sensex to post biggest point-wise gains in last six week, gaining by over 850 points to end the week above 17K-mark at 17,082.69. Buying was seen across-the-board as all 13 sectoral indices closed up between 0.95 percent to 8.73 percent with IT, tech, banks, consumer durable and realty segments leading the pack.

Economic data released last week played its role in boosting market volatility. Index of Industrial Production (IIP) was better than July this year but slowed down to 4.1 percent in August from 4.5 percent in the same month last year, suggesting the slowdown in economy which might induce the central bank to pause on rate hikes.

However, food inflation inched down to 9.32 percent for week ended October 1 from 9.41 percent in the previous week and overall inflation too slipped marginally to 9.72 percent in September from 9.78 percent in August, but stood still higher than the comfort level of the apex bank.

Technical analysts are claiming that low level buying or bargain-hunting is responsible for the rally but they also opined that fundamentals are still bearish and there will be no major change in this in the near term. In their favour they put the figures of industrial production, rising inflation and fears of further interest rates hike. Along with these domestic factors, persistent uncertainty over euro zone economy is sufficient to pull investor's sentiments down.

Indian stocks will continue to take cues from developments in Europe which has been grappling with debt crisis, they added.

But some analysts are saying that all possible negatives have been discounted in the current prices, so the downside seems limited. Lack of negative news flow is enough to sustain the markets.

As per their view, investors should keep a close watch on the management outlook for corporates announcing results which will provide cues on futures earnings outlook.

The Q2 results season has started on a positive note, with good results from IT bellwether Infosys, which has also revised upwards its full year earnings guidance in both dollar and rupee terms. For the next 2-3 quarters, Infosys would need to be judged more by the performance of the rupee vis-à-vis IT sector performance.

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