TCS earnings, IIP data among 6 factors guiding market this week

Equiry benchmarks Sensex and Nifty extended their gains for the third straight week on hopes of faster rebound in the economy, gradual easing of Sino-India tensions and reports of good progress in Covid-19 vaccine trials.

Going ahead, market participants will zero in on June quarter earnings, with more than 100 midcap and smallcap companies scheduled to announce quarterly numbers durung the week. IT major Tata Consultancy Services (TCS) will kick off the season with its Q1 results on July 9.

The 30-share Sensex gained 850 points to 36,021 during the week ended July 3, while the 50-share Nifty added 224 points to 10,607.

Here are a few key factors that may guide the market next week:

Macroeconomic data
On the economy front, market participants would be eyeing the May Index of Industrial Production (IIP) data, which is scheduled to be release on July 10. India’s industrial production contracted the most in at least two decades in April due to the nationwide lockdown. The IIP shrank 55.5 per cent year-on-year in April, the most since at least 1994. On July 10, market participants will also be looking forward for RBI's forex reserve data. Foreign exchange reserves in India decreased to $5,05,570 million in the week ended June 19 from $5,07,644 million in the previous week.

Quarterly earnings
Market participants will be eyeing Q4 result announcements of Bodal Chemicals, IFB Industries, NBCC, Dish TV, South Indian Bank, Sadbhav Engineering, IRCTC. June quarter earnings season also kicks of this week with IT major TCS announcing its numbers on July 9. Jimeet Modi, Founder and CEO, SAMCO Securities & StockNote said a definitive movement in markets may be visible once India Inc starts unveiling Q1FY21 earnings performance which will offer some first-hand analysis of the ground situation.

Global cues
On the global front, investors will be eyeing macroeconomic reports from world’s largest economy, US, starting with Markit Services PMI, Markit Composite PMI, ISM non-manufacturing PMI on July 6 followed by total vehicle sales, Redbook, IBD/TIPP Economic Optimism on July 7, Consumer Credit Change on July 8, initial jobless claims, wholesale inventories on July 9 and finally core PPI, Baker Hughes Total Rig Count on July 10.

Covid-19 update: Any further update on Covid-19 vaccine in the near-term may further boost market sentiment. Total coronavirus cases in India crossed 6.73 lakh as of July 5. As many as 19,200 people have succumbed to the fast-spreading virus. What is worrying is that Mumbai and Delhi, two of the most crowded cities in India, have emerged as the epicentre of the outbreak. These cities also house headquarters of most large companies, which is impacting normal course of operations. Globally, total cases are moving towards the 11.50 million mark with over 5.33 lakh deaths.

Technical Outlook
After forming a Spinning Top candle in the previous week, Nifty50 rallied swiftly during the week gone by. The index is now hovering around the 10,600 mark, which has acted as strong support on the way up and might turn into a crucial resistance. “Each leg of the rally from March till now is getting narrower in price range and the whole runup has occurred in the form of a rising wedge pattern, which is a bearish signal and might be nearing its end. Though there is a lot of optimism on Dalal Street and in global equities on signs of positive outcome in drug trials, we assume the market is overbought for the short term and expect limited upside,” says Modi of SAMCO Securities.

Other factors
Progress of monsoon, rupee and crude price movement and inflows from foreign and domestic institutional investors will give further direction to the market during the week ahead. Till July 1, cumulative rainfall was 15.8 per cent above long-term average with the weekly rainfall at 0.7 per cent falling below long-term average.