RBI policy, earnings to set course for markets: Angel Broking

The markets started the week on a low note with laggardness in the investor sentiments. Concerns about the euro-zone debt crisis and the lack of agreement on raising the US debt ceiling also lingered on the markets.

The onset of the earnings season weighed heavily on the markets as pressure hovered on the companies to prove their earnings quality in the touch macro environment.

Financial majors likeHDFC Bank,Axis Bank andYes Bank delivered strong results and remained firm on the bourses whileWipro,Ashok Leyland and several other companies reported lower than expected earnings.

Notably, Crompton Greaves scrip shed ~27% in 2 days on account of poor quarterly performance and unclear management guidance over the future outlook.

The overall earnings quality of theIndia Inc seemed to be pressured which was reflective through margin dips, as well as unfavorablemacro environment, which has proved worrisome for many sectors.

Alternating between positive and negative terrains, the markets slipped into the red and reached their lowest level by Thursday in more than a week. The markets reversed direction on Friday amid the positive vibe of the second bailout forGreece and on measures to prevent sovereign-debt contagion from spreading to other European countries.

Market breadth remained strong and the pick-up in monsoon as well relaxed food inflation garnered momentum for stocks. On Friday, markets ended in green with Sensex and Nifty gaining 1.3% and 1.7%, respectively.

The week ahead will be crucial, as the crucial earnings season has gathered steam. The investors will closely watch the 1QFY2011 results as well the management comments, in order to gauge future earnings potential, especially, when Indian firms are witnessing rising expenditures amid high input costs and elevated interest rates.

Investors will also be watchful of the Reserve Bank of India (RBI)) monetary policy next week which will determine the near-to-medium term outlook.

(The views expressed in the article are from Angel Broking) ( Source : ET)