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Stock markets are likely to open with negative bias amidst weak global cues though India Inc commenced the result season on a better note with TCS numbers beating the market expectation on all crucial metrics.
Though SGX Nifty at 17,190 indicates only a moderate downfall at open for Nifty futures, which on Monday closed at 17,227.45, some markets in Asia-Pacific region are trading lower, indicating market may see pressure as the day progress.
Shrikant Chouhan, Head of Equity Research (Retail), Kotak Securities Ltd, said: “Due to lack of positive strength in global markets and persisting worries about more rate hikes by the key central banks going ahead, investors are not taking any chances and steadily trimming their holdings. Caution along with weak market sentiment will prevail as all eyes will be on the US FOMC minutes to be released on Wednesday, which will give some hint about the future rate setting decision by the Fed.
Mixed signal from Asia-pacific stocks
Japan's Nikkei and Korea's Kospi are struggling with 2 per cent lower in early deal on Tuesday; Taiwan's weighted average was the worst lot with equities tumbling over 3.5 per cent. However, the Phillippines, Australian and New Zealand markets are providing some comforts, as they eke out marginal gains.
Overnight, the US stocks closed lower. Amidst these extreme signals, traders expect, Indian markets to turn volatile during the day.
Analysts expect the US markets to remain weak and that could cause some pressure on Indain markets too. Besides, escalated geopolitical tension between Russia and Ukraine could check Indian market's resilience, they added.
"It's a big week for the US, with the Fed minutes also being released on Wednesday and retail sales on Friday. Earnings season also kicks off later this week offering crucial insight into how corporate America views aggressive monetary tightening and the outlook for the economy. I don't expect it will be a particularly upbeat few weeks," said Craig Erlam, Senior Market Analyst, UK & EMEA, Oanda.
Siddhartha Khemka, Head - Retail Research, Motilal Oswal Financial Services Ltd, said: Going forward, markets are likely to witnessed swings as any escalation in geopolitical environment can lead to increase in volatility.
Good show by TCS, but...
IT major Tata Consultancy Services’ profit grew 8.3 per cent to ₹10,431 crore in the second quarter of the current fiscal versus ₹9,624 crore reported in the same period last year. “In terms of profitability, we hit a milestone, crossing ₹10,000 crore for the first time ever,” said Rajesh Gopinathan, CEO of TCS. The profit witnessed a sequential uptick of 10 per cent, from ₹9,478 crore reported in the first quarter of FY23.
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TCS results may be a relief, but muted EPS growth implies valuation remains expensive
Revenue from operations grew year-on-year by 18 per cent to ₹55,309 crore in Q2 FY23 against ₹46,867 crore reported during the corresponding period last year.
Though TCS results were better than market expectation, analysts see several headwinds for IT sector going forward.
According to Mitul Shah - Head of Research at Reliance Securities, "We believe that IT Services would not remain immune to worsening global macros in terms of rising inflation, economic slowdown, currency headwinds and likely cut on spending. Revenue growth would taper down to low double digit in FY24E, while QoQ decline in order book, clear lower employee addition, higher attrition and lower pricing power ahead would lead to valuation multiple contraction close to its historical averages.
Meanwhile, foreign portfolio investors continue to remain on sell mode, but the domestic investors, so far, was able to absorb the selling pressure.
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