Market Drivers

What will drive markets from here on?

As the Nifty gets closer to the 8200 mark, the question is whether the rally has further legs from these levels? The answer can be quite tricky. Currently, there are quite a few key factors which need to be addressed before we can have a clear picture on where the markets are headed.

Infosys results could be the key…

The Infosys results next week could be the key to understanding how the markets will perform from current levels. There are quite a few reasons for the same. Firstly, leading technology companies like HCL Tech have already given a profit and revenue warning for this quarter due to the risk of cross currency impact. It will be critical to see if Infosys is able to buck this trend and maintain a positive earnings outlook. Secondly, Infosys has now had a fairly long vintage under the new management dispensation. A positive result and guidance from Infosys will only serve to reinforce this confidence in Infosys in particular and the technology sector in general.

Quarterly numbers need to grow…

Quarterly numbers overall have disappointed for the last 3 quarters. One more quarter of disappointing results could put a major question mark over projected Nifty cash flows as well as future valuations. Secondly, quarterly numbers are a grass root affirmation that the much-touted GDP growth is actually showing up in corporate bottom-lines. Thirdly, there is the issue of broadening of the profit base. For too many quarters the focus of profit and ROE growth has been solely with the healthcare and IT sector. That base needs to be broadened.

Bihar is a question mark…

The outcome of Bihar elections is a million dollar question. If the NDA manages to get a majority in Bihar then it may serve to reinforce the popular mandate for the current NDA government. However, if the JDU-RJD alliance manages to trump the NDA, it may only serve to underscore the shocking result of Delhi state elections. Worse still, it may force the current NDA government to shirk away from the path of serious and rapid reforms and focus more on populist measures. That could be disastrous.

What about FPI flows…

That will be the one key factor determining the future course of the Indian markets, and hence the key driver. You can call it hot money, but a return of FPI buying is critical to provide a strong base for markets. While domestic flows can act as a bridge, they will find it hard to drive markets in the absence of FPI flows. That, above all, may determine if Nifty upsides will sustain at higher levels. ©

You can ask us your stock related questions with #AskReligareOnMarkets via our Twitter channel @religareonline

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