Earnings season: Spring time?

Markets experienced another languid week on the bourses, as investors' preferred to sit on the sidelines and let Hindu priest take centrestage to restore the lord's abode. As the ides came closer, these concerns seem to have overwhelmed the bourses. However, unlike what the ides portend, the day passed uneventful resulting in investors' jumping back into the ring.

While tensions on the temple dominated thoughts over the past week, the Government in the current quarter seems to be on a mission announcing several changes in industrial policy, taking forward the much talked about second generation reforms. Administered pricing in the petroleum sector will be dismantled from the new fiscal. Private competition will be permitted in marketing of transportation fuels. Parameters for the DPCO net have been re-defined and the sugar industry has been de-controlled. In addition, the Government is finally gaining momentum on disinvestments. The Department of Disinvestment had indicated a list of five companies that are likely to privatised by March end. These include big ticket sales of Maruti Udyog and IPCL. Consequently, over the next fortnight, announcements on this front could be expected, which could energise the markets.

Also, April will mark the start of the earnings season and markets are likely to start reflecting expectations on annual results of corporates. There could be improvement in fourth quarter performance, as the economy exhibits signs of gaining momentum. Although the index of industrial production (IIP) for the month of January came in lower, as compared to the corresponding period of last year, the month on month numbers are improving. Also, much of the current slowdown began in the fourth quarter of the previous fiscal. Consequently, going forward, the YoY effect will be nullified and with signs of a recovery, higher YoY growth could be expected. This too could work in favour of companies.

We did a small exercise to gauge the extent of the run in BSE components. Of the 30 scrips on the bench mark index, 13 are trading less than 15% of their 52-week highs. The pharma and two-wheeler scrips have touched new highs reflecting much of the bullishness in these sectors. View result.