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Earnings season ahoy!

Jul 6, 2002

Markets closed another week ahead gaining some momentum compared to last week. The past two days have seen lack of investor participation in the markets. With no compelling reason to be on the street, investors' have preferred to sit on the sidelines. The upcoming earning season could stimulate some excitement. Having said that, the weakening U.S markets are subduing sentiment for the tech sector, which currently controls much of domestic investor interest. The Equitymaster poll indicates that 71% of the respondents expect corporate India to beat market expectations on growth for quarter ended June '02. Assuming suitability of sample, the markets did not seem to reflect this optimism or then markets hope corporate India beats growth estimates but is not very confident on the same being achieved.

The techs' are the first to flag off the earning season. Overall, environment has not been very conducive with communal riots and border tensions. In our interactions with a leading travel company, the executive did mention that business travel, especially those looking at the region for the first time, are likely to have postponed their trip. For the same reason, on escalation of tension, software scrips did experience weakness. Having said that, fresh business could have been tight but repeat clients and longer gestation projects, which now constitute sizably to revenues is likely to have remained strong. Further, these challenges were quarter specific and unlikely to stain future numbers.

The much-publicized cabinet reshuffle did not rouse the much-anticipated reaction in the markets. The portfolio switch between Minister of Finance and External Affairs minister, contrary to expectation, was greeted with indifference. Despite popular statements from the new FM, to win warmth of the nation, markets preferred to look the other way. The cabinet reshuffle seems to suggest long-term planning on part of BJP in preparing for the 2004 general elections. Individuals, who are identifiable by the masses, have been awarded berths. On gets the feeling that much of the policy initiative is frozen, especially tough second-generation reforms, with only execution pending. To that extent, the administrating minister is only a figurehead. Also, we could look forward to a more popular budget.

Markets, as mentioned earlier, are likely to be driven by results next week. The line-up includes, amongst other, the titan of tech -- Infosys. With results through July, investor interest could pick up. On the other hand, U.S markets pass through confession time. It maybe time to focus on our own strengths.


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