Post hitting lifetime highs, market awaits fresh triggers

The Indian stock market may not have too many new triggers other than the guidance corporates may give for FY18, along with the upcoming quarter numbers and an update on the monsoons. Most of the other triggers including inflation, interest rates, crude oil price and Goods and Services Tax, have been factored in by the market already.

As a result, after hitting lifetime highs on March 17, Nifty 50 has been moving in a very tight range. While the ongoing January-March quarter is expected to be little worse than the October-December quarter, market analysts are not too perturbed as the same has already been factored in. Investors are now looking for FY18 guidance as currently there are high expectations of earnings growth.

According to Kotak Institutional Equities, investors have chased valuation to ‘high’ levels on expectations of a strong recovery in the economy and earnings. “We expect a slow recovery and note that our strong earnings growth estimates are contingent on a turnaround in the banking sector and higher global commodity prices,” it added. “Earnings growth remains the key; any disappointment on that front would take the market lower,” Citi Research pointed out in its strategy note dated March 22.

Motilal Oswal expects Sensex earnings growth of 24 per cent in FY18 but it also added that further re-rating will happen only on earnings delivery. Edelweiss is optimistic about corporate performance and capacity utilisation going forward. Bank of America Merrill Lynch too, expects business cycle to improve in the next several quarters.

Monsoon will be the other big trigger. After three years of good monsoon, a ‘below normal’ forecast by Skymet will be seen as a negative. Investors would be keenly watching fresh updates on the same as prices of food items have already started rising, spiking inflation.

Resolution of non-performing assets of banks will be the other big factor.

“Nothing concrete coming out of the NPA resolution efforts of the government and RBI is not factored in by the market,” said Vijay Singhania, Founder-Director, Trade Smart Online.

Triggers such as global growth will also impact the Indian markets.