This week, the benchmarks are expected to correct further on weak global cues. However, individual stocks will swing, at least for a couple of days, according to their financial performances.

The International Monetary Fund warned last week of an “alarmingly” high risk of a deeper global slowdown unless officials in the US and Europe address threats to their economies.

A host of companies including Reliance Industries, Axis Bank (Monday), HCL Technologies (Wednesday), ACC, Ambuja Cement (Thursday), ITC and TCS (Friday) will announce their September quarter financial performances. Besides their performances, market participants would be keen to know the management commentary that would give the overall outlook of companies for the current year and the next fiscal.

Another important clue will be monthly Whole-sale Price Index (WPI) for September, which will be out on Monday. This crucial inflation data will give an indication of the stance the Reserve Bank of India will take in its October 30 meet. Analysts are expecting an increase in WPI, following the recent diesel price hike. According to Reuters poll, the inflation is surging to 7.70 per cent in September – the highest level this year.

Already there are clamours for a rate cut from India Inc Even Finance Minister P. Chidambaram said the RBI and the Government must work in tandem to bring down interest rates.

On its part, the RBI has so far been saying that targeting inflation would be its first priority. Recently, RBI Deputy Governor Subir Gokarn said the Government’s reform initiatives on growth and inflation would be considered while formulating Monetary Policy. Though the Government initiatives have received a strong stamp of approval from foreign institutional investors, who have been pumping money into Indian stocks continuously, they failed to convince S&P Rating, which is asking for more such initiatives. The rating major last week had said that there is a “one in three” chance of a downgrade of the India’s sovereign rating to “junk” status in the next two years.

HSBC Global Research, which raised its Sensex target, remained underweight on Indian equities citing expensive valuations. While fiscal consolidation, a revival of investment spending and structural reforms to promote growth are encouraging moves, but they “will take time to revive growth,” HSBC added.

“Our underweight stance on India in a regional context is premised on a weak INR (Indian rupee), limited reform agenda and slowing economy. While the policy announcements have led to a surge in foreign fund inflows, resulting in INR appreciating 5 per cent against USD in September, it will take time for economic growth to recover and the run-up leaves valuations expensive (India trades at a 30 per cent premium to the rest of Asia). As such, we remain underweight India, albeit raising our Sensex targets to 18,700 (from 18,000) for CY12 and 20,000 (from 19,000) for CY13 after the positive turn of events.”

>badrinarayanan.ks@thehindu.co.in

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