It was another day of record highs for equity market. The benchmark Sensex and Nifty rose a third of a per cent on Friday, with the BSE Sensex hitting a life high of 34,638.42, intra-day, as investors remained upbeat of continued recovery in corporate earnings.
While the Sensex closed 89 points or 0.3 per cent higher at 34,592.39, the NSE Nifty50 index was up 30 points or 0.3 per cent at 10,681.25 points. For the week, both the indexes were up around 1.2 per cent.
Market experts say the continued upmove in the markets suggest that investors may not be too worried of some of the weak macro economic parameters, while remaining extremely bullish on strong earnings growth.
“If you look at the Nifty 50 index, the expectation is that PAT (profit after tax) on a year-on-year basis will grow between 15-20 per cent, which will be very good. In the last quarter, the growth was around 10 per cent, compared with a flattish growth in the first quarter. So the trend is very positive,” said Vinod Nair, head of research at Geojit Financial Services.
Continuing strong flows into mutual funds and a positive momentum in most major global equity markets is also having a positive rub-off on Indian markets, say analysts.
On the corporate earnings front, so far the country's top two software services exporters have reported mixed results.
Tata Consultancy Services shares declined 0.6 per cent after it reported a 4 per cent year-on-year decline in third quarter net profit late on Thursday.
While the results were largely in-line with expectations, analysts were concerned over growth.
“We believe growth will not accelerate meaningfully based on BFSI (banking, financial services and insurance vertical) challenges in North America, pricing pressure in traditional business and volatility in regional market segment. Also, elevated operational risk arising out of investments in large deals and shift in geo-mix will keep margins below the 26-28 per cent aspirational band,” said analysts at HDFC Securities.
Infosys, meanwhile, ended up 0.3 per cent after the Bengaluru-based company reported a better-than-expected 38 per cent jump in net profit for October-December, helped by tax benefits.
Among other major gainers on Friday, ICICI Bank, the country's largest private lender, gained 2.6 per cent, and Maruti Suzuki, Oil and Natural Gas Corporation, Housing Development Finance Corporation and Reliance Industries, all rose more than 1 per cent.
On the other hand, shares of Bharti Airtel, Bajaj Auto, Power Grid and ITC were down about 1 per cent.
Apart from the quarterly earnings, investors are also keenly eyeing the upcoming budget on February 1. The budget assumes importance in the wake of pressures on the fiscal deficit front, rising inflation and falling GST (Goods and Services Tax) revenue.
While, the budget is unlikely to be heavy on populism, Finance Minister Arun Jaitley is widely expected to announce policies aimed at addressing some of the rural stress, which should help drive rural consumption and in turn perk up the economy.
Geojit's Nair expects the equity markets to continue to move up, but not as much as last year. Also, given the run up and the uncertainties around how the Budget will pan out, there is a need to be cautious in the near-term.
“For the main indices, our expectation is very muted. For example, we are only expecting 8 per cent rise in key indices for the year ending December. However, stock specific there still are opportunities. So our view is to stay stock specific, rather than looking at the indices,” he added.
