D-Street investors keep one eye on earnings, one eye on pace of vaccination

The mood of equity markets this week is likely to be driven by two factors. These are December quarter corporate earnings and pace of large-scale vaccination.

Four key information technology companies kicked off Q3FY21 earnings with stellar performances. On the topline growth, Infosys outperformed both Tata Consultancy Services Ltd and Wipro Ltd. From the financial space, leading private sector lender HDFC Bank Ltd reported 18% year-on-year (y-o-y) rise in net profit to 8,758 crore aided by higher net interest income and other income.

In this week, Nifty heavy-weights including Asian Paints Ltd, Bajaj Auto Ltd, Biocon Ltd and Ultratech Cement Ltd, will publish their quarterly earnings.

Largely, most companies are expected to report decent results with volumes continuing to recover. However, for many sectors, with crude and metal prices rising, input cost inflation is likely to impact margin growth. Net-net, given this sharp rally, the Street seems to have priced-in earnings recovery, say analysts. That said, a knee-jerk reaction cannot be ruled-outed in case of extreme negative earnings surprise, they caution.

The excitement in the primary market continues to be high. The initial public offering (IPO) of Indigo Paints will open from January 20-22. Analysts are expecting a slew of IPOs to hit the primary market in months to come. They say, the buoyant market mood aided by ample liquidity is likely to attract more companies to opt for the IPO route for fundraising, analysts add. Investors would also be closely watching the offer for sale (OFS) of Steel Authority of India. Another public sector unit that was in focus last week was GAIL India for share buyback and interim dividend. Among other stocks, Bharti Airtel was in news for the likely increase of weightage in the MSCI index.

Coming to vaccination roll-out, large scale vaccinations have begun in India and many other countries. The pace of vaccinations would decide how soon the global economy can get back on its feet, analysts say. While the stock market is pricing-in a faster economic turnaround, analysts caution about the downside risks from the fresh restrictions put in place in various countries to deal with the second wave of virus inflections.

Meanwhile, the new coronavirus relief package announced by the US government failed to cheer the global market. US President Joe Biden’s latest relief plan of $1.9 trillion, follows the $900-billion package announced last month. The fresh package includes measures like more direct payments to US citizens and government bodies to give spending a fillip and boost the economy.

Back home, in a run-up to the Union Budget, hopes and expectations from the Budget could keep the market’s mood jittery, analysts add.

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