Stock Market: Earnings dampen rally; resilience emerges in broader market

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By S Jha

New Delhi, April 18: The equity market is now poised at such a time where the local factors weigh high, as the corporate earnings begin to guide the sentiments. In the US, Dow Jones has rallied almost six per cent in one month, which had also been a case for Nifty if TCS and Infosys had not spoiled the party.

The bond yield and stock earning gap has almost narrowed to make the equity investment attractive. Dollar is also declining to help the flow of foreign portfolio investment attractive. This could have been an ideal time for bulls to take charge of the Dalal Street.

But the index heavyweights Infosys and TCS chose not to oblige the bulls and preferred the bears by giving one of the worst quarterly results. The spate of layoffs in the IT sector must have warned the eagle eyes of the stress in the industry. The US is knocking at the door of the recession. Europe is already in recession, and there is no immediate trigger for the country to come out of the economic slowdown.

With the US and Europe being the principal catchment regions for the IT sector, investors are keeping their fingers crossed at the upcoming quarterly results from other heavyweights such as HCL Technology and Tech Mahindra. Also, the IT midcaps are to be watched for they have been giving stellar results in the past.

It may be recalled that Persistent Systems had stunned the market with its last quarterly result, which had sent the scrip soaring past Rs 5000. But clearly, the foreign funds are showing preference for North Asia, including China.

By reporting 4.5 per cent GDP growth in the first quarter, China has sprung a surprise, and the Communist country may even go past its own target of five per cent for the year. International fund houses have reacted speedily to revise the GDP growth guidance positively for China. This may make China more attractive for equity investment than India. In the absence of strong foreign fund flows, the market participants are of the view that the bull-run may have to wait in India.

But the broader market is doing better, and stock specific actions are being observed in the market. KPI Green, the solar company, has run fast to close at Rs 478. The greater emphasis on the climate mitigation efforts is rubbing favourably on green energy stocks.