Market course hinges on Q4 results

Better wait for correction before making fresh buys

The BSE Sensex surged a hefty 481 points on Wednesday, taking the total score to 953 points in the week under review that comprised only three trading sessions. An above-average monsoon forecast, easing inflation, a rise in industrial production and flow of more positive news sparked a surge in markets.

A highly encouraging forecast for the ensuing monsoon at the outset of the week certainly changed mood of the market participants from bearish to bullish, but the quantum of the surge that markets achieved was beyond expectation of any one including the staunchest of the bull operators.

But it happened only because of the FIIs returning to buy Indian equities. In the previous week, they had been net sellers and therefore were not expected to return to buy so soon.

The markets remained officially closed on Thursday and Friday on account of Dr Ambedkar Jayanti and Ram Navami. Investors, however, ignored truncated week and rushed to accumulate stocks right from day one of the week.

After sustaining losses in consecutive two weeks that demoralised the market bulls from taking further risks, the markets were feared to go further down this week in view of the holidays.

But the bear operators who had been dreaming to reap rich rewards on their outstanding short positions thinking that prices of stocks would go further down, were taken aback when bull operators returned supported by a string of positive news and aided by FII buying.

The bull operators who smelled a streak of positive news in the form of global cues, better-than-expected economic data and a tamed inflation rate, received an unexpected support from a highly positive forecast about the ensuing monsoon and a spike in foreign exchange reserves.

However, the major positive impact was that of a good monsoon that helped many rural and agro-dependent industry stocks to rise. Shares of fertilisers, irrigation systems, and agri-machinery manufactures shone. A good monsoon forecast also helped seed producing companies.

Two-wheeler and passenger car company shares also gathered momentum as a good rainfall this year would mean return of prosperity in the vast rural India and a prosper rural India would want more vehicles. Even cement company shares attracted a fair investment demand.

Thus, the demand for shares which appeared to be waning until the previous week suddenly increased and exceeded the supply. So, the bear operators turned frantic buyers of equities as they were left with no option but to cover their short positions and that too in a rising market which provided the upgoing Sensex both momentum and quantum and hence a whopping jump of 953 points in just three trading days.

As per the forecast, the monsoon this year would arrive in time or even before time and pour aplenty, but it is still one and a half months away. The last week's rally being based mainly on this factor, it cannot prolong till the actual arrival of monsoon.

In the meantime, there lies a corporate number season which could not be expected to churn out encouraging numbers even though it kick-started with Infosys Technologies coming out with encouraging numbers after the markets closed for the week.

The positive numbers by the second largest IT major might help the markets open positive and rise further but many other leading corporate may not provide such numeric support. Therefore, the market movements from now onwards would be governed chiefly by the corporate numbers with tilt being in an upward direction.

Therefore, it is a time when utmost caution would be needed before taking a buy call in any stock. Cues from global markets are unlikely to remain positive. A rate hike by Fed is inevitable. Chinese economy continues to be a major cause of global worries.

European nations are still reeling under industrial recession and crude oil is still far from stablising. Indian markets being prone to getting by news from these nations, cannot go up uninterruptedly solely on hopes of a good monsoon.

Bulls operators and investors will have to keep an eye on proceedings in the Parliament that is meeting from April 25 for the second part of the budget session. The budget session is more important in the sense that the budget for the financial year 2016-17 is to be passed and also some important bills including GST are expected to be cleared.

Investors are, therefore, suggested to observe self-constraint especially while buying afresh. They would rather wait for a correction in prices before picking up even blue-chip company shares for investing.