Stocks are expected to consolidate around their present levels this week after a brutal selloff in the past five sessions that saw the sensex plunging more than 4,000 points, with investors wealth dropping by ₹18.43 lakh crore.
Analysts said though the weakness in equities may persist, a huge crash is unlikely in the holiday season which witnesses limited participation from foreign portfolio investors (FPIs).
Moreover, the markets have reacted to the key event of the US Federal Reserve cutting interest rates by 25 basis points, while striking a hawkish tone.
The bourses will be closed on Wednesday because of Christmas.
``The next key event that the markets are watching out will be the quarterly results. It will determine the direction of equities in the near term. After a poor second quarter, expectations remain muted, but chances are that the third quarter will be not as bad,’’ an analyst with a foreign brokerage said.
Among the frontline stocks, Infosys has announced its board will meet on two days beginning January 15 to consider the financial results for the quarter ended December 31, 2024.
Before that HCL Technologies will disclose its scorecard on January 13.
FIIs have been a key factor behind the last crash: they were initially on a buy mode but reversed their strategy since December 14 on account of a rising dollar index that gauges the US currency’s strength against a basket of six currencies and US yields.
Though US President elect Donald Trump has said that he wants a weaker dollar, it has not stopped investors from scurrying for the currency.
Another factor behind the crash is GDP growth which has fallen to a seven quarter low of 5.4 per cent in July-September 2024.
V.K. Vijayakumar, chief investment strategist, Geojit Financial Services, said FPIs started selling from December 13 after they bought equities worth ₹14,435 crore in the month.
``Rising dollar (DXY or dollar index above 108) and steady rise in the US 10-year bond yields to 4.5 per cent contributed to the FPI selling. India-specific issues like slowing growth concerns and flat corporate earnings in the second quarter also contributed to the FPI selling. The strength of the US economy, good corporate earnings growth and strong dollar are factors favouring the US,’’ he said.
Analysts said the festival season could result into some better numbers on a sequential basis for India Inc. But sectors such as FMCG may continue to feel the pinch of a slowdown in urban demand as inflation has eaten into people’s budgets.
The IT sector is forecast to come out with subdued numbers though their guidance will be watched keenly. A recent report from Centrum said the revenue growth would remain modest in the October-December period because of seasonality and growth would only pick up from the fourth quarter of this fiscal.
Though Accenture beat Street estimates on Thursday with a $17.7 billion revenues for the quarter ended November 30, 2024 and bumped up its annual revenue growth to 4-7 per cent from the earlier forecast of 3-6 per cent, the street remains worried that an hawkish Fed could hurt discretionary spending thereby affecting the domestic IT sector.
