MUMBAI: Growing concerns over a slowdown in economic growth coupled with rising inflation could see investor sentiment remaining jittery. While the higher-than-expected industrial production figures may have soothed bruised sentiments temporarily, cracks are appearing on the foundation of India’s five-year equity bull run, say experts.
Going forward, investors are expected to gauge the impact of the government and RBI’s measures, to moderate inflation on corporate earnings growth before taking a call on the market. The January-March quarter earnings announcements, spread over the next few weeks, will enable investors to realign their share valuation expectations with a likely slowdown in corporate profits.
“We believe that consensus growth expectation is likely to be revised down owing to the impact of moderation in domestic and global growth, and the possible margin pressures,” said JP Morgan, in its recent strategy note.
Some key earnings announcements this week include that of software majors — Infosys Technologies, Wipro, HCL Technologies other than Indian Hotels, Zee Entertainment and Zee News. In the case of software companies, investors are more interested in their earnings guidance for 2008-09 in the wake of the weakening US economy.
Quarterly earnings of US financial heavyweights Citigroup and Merrill Lynch, this week, will also be watched by the investor community globally. While their earnings are expected to be sharply lower, as the credit market crisis has eaten into values of mortgage-backed securities, analysts are looking at any negative or positive surprises in the results for further cues. On Friday, US markets ended 2-3% lower.
Back home, indices ended the week on a positive note, with investors taking heart from the higher-than-expected industrial production figures, the best in four months, while ignoring the inflation rate, which rose to a three year high. Fund managers said Friday’s positive close in an indication that the market is comfortable with inflation, as long as economic growth is healthy.
India's industrial production in February grew at 8.6%, faster than 5.8% in January, but slower than 11.2% in the same month last year. Inflation jumped to 7.41% in the week to March 29, which is expected to prompt the central bank to suck out more money from the banking system through a hike in cash reserve ratio (CRR — the amount banks are expected to hold with RBI in cash).
Limited money supply with banks is expected to see banks’ lending rates at higher levels. Investors fear higher lending rates will continue to hamper consumer spending and also impact investment activities of corporates at a time when equity is not the preferred route to raise money.
“With inflation accelerating and growth moderating, the macro environment continues to worsen. We expect the Reserve Bank of India to tighten 50 bp in April due to the preponderance of inflationary concerns,” said Goldman Sachs in a recent note.
Going forward, investors are expected to gauge the impact of the government and RBI’s measures, to moderate inflation on corporate earnings growth before taking a call on the market. The January-March quarter earnings announcements, spread over the next few weeks, will enable investors to realign their share valuation expectations with a likely slowdown in corporate profits.
“We believe that consensus growth expectation is likely to be revised down owing to the impact of moderation in domestic and global growth, and the possible margin pressures,” said JP Morgan, in its recent strategy note.
Some key earnings announcements this week include that of software majors — Infosys Technologies, Wipro, HCL Technologies other than Indian Hotels, Zee Entertainment and Zee News. In the case of software companies, investors are more interested in their earnings guidance for 2008-09 in the wake of the weakening US economy.
Quarterly earnings of US financial heavyweights Citigroup and Merrill Lynch, this week, will also be watched by the investor community globally. While their earnings are expected to be sharply lower, as the credit market crisis has eaten into values of mortgage-backed securities, analysts are looking at any negative or positive surprises in the results for further cues. On Friday, US markets ended 2-3% lower.
Back home, indices ended the week on a positive note, with investors taking heart from the higher-than-expected industrial production figures, the best in four months, while ignoring the inflation rate, which rose to a three year high. Fund managers said Friday’s positive close in an indication that the market is comfortable with inflation, as long as economic growth is healthy.
India's industrial production in February grew at 8.6%, faster than 5.8% in January, but slower than 11.2% in the same month last year. Inflation jumped to 7.41% in the week to March 29, which is expected to prompt the central bank to suck out more money from the banking system through a hike in cash reserve ratio (CRR — the amount banks are expected to hold with RBI in cash).
Limited money supply with banks is expected to see banks’ lending rates at higher levels. Investors fear higher lending rates will continue to hamper consumer spending and also impact investment activities of corporates at a time when equity is not the preferred route to raise money.
“With inflation accelerating and growth moderating, the macro environment continues to worsen. We expect the Reserve Bank of India to tighten 50 bp in April due to the preponderance of inflationary concerns,” said Goldman Sachs in a recent note.
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