Market pulse: Ordinary earnings will keep D-Street rangebound

By Rajesh Gupta

The domestic market is likely to remain rangebound next week, displaying just a tinge of positive bias. On one side, liquidity is driving the market up, while on the other, a not-so-good earnings season is proving to be a drag.

An earnings recovery is well on its way, as some 700-plus manufacturing companies so far have reported 12-13 per cent YoY growth in net sales and profits, accompanied by a 50 bps improvement in margins in September quarter despite being roiled by volume de-growth due to GST-led de-stocking. As GST pressures ease, we expect H2 to see acceleration in earnings growth.

In the week ahead, investors will draw hope from PSU banks, which are looking better from the prism of asset quality, as the problem is getting addressed by government recapitalisation. Some may look to raise capital as well.

A string of events such as state elections, crude price movement and news of incremental reforms will also influence market movement. However, these events may not offer any firm direction to the market. We expect the market to see a lot of stock-specific action.

We expect consumer durables, home finance, cement, select PSU banks, IT, beaten-down MFIs and SFBs, gas distribution and chemicals stocks to do well in the near term.

(Rajesh Gupta is Assistant VP, Retail Research, SBICAP Securities. Views are his own)