Weak monsoon, quarterly earnings to set market's course

MUMBAI: Markets are likely to be on edge this week with the country's largest mortgage lender HDFC, and software majors Tata Consultancy Services and Infosys poised to report their first quarter earnings.
The progress of the southwest monsoon, which has hit the worst deficit in a decade, and a slew of economic data at home and abroad will also set the course for the markets this week.
While weak industrial production and higher inflation data could queer the pitch for a much-anticipated interest rate cut by Reserve Bank of India when it holds its quarterly policy review on July 31, traders will keenly await earnings announcements by IT and financial majors.
"The results are not going to be particularly happy; it is hard to envisage any sector giving an upside surprise," said Saurabh Mukherjea, head - equities and research at Ambit Capital. However, some banks could surprise by reporting better asset quality numbers.
Otherwise, markets seem to have priced in most expectations," he said. HDFC will kick-start the April-June quarter earnings season by announcing its results on Wednesday, while HDFC Bank will declare earnings on Friday.
IT majors Infosys and TCS will report domestic earnings for the April-June quarter on Thursday, setting the tone for smaller firms in the sector. Muted guidance by Infosys in the preceding quarter caused panic and sent the stock plunging 13%.
Analysts said the recent depreciation in the rupee is expected to cause rupee revenues of the two large-cap IT firms to grow about 8%, though margins could be under pressure from salary hikes and visa costs.
"A marginal cut in dollar guidance due to cross-currency fluctuations has been priced into the stocks. However, what could surprise the markets is a cut in volume growth guidance by Infosys," said Dipen Shah, sector analyst and head - private client group research at Kotak Securites.
Investors will keenly await updates to India's monsoon forecast. Even as North India received pre-monsoon showers on Friday, the deficit in rainfall worsened to 30% so far this year, the worst in a decade.