Macro-data to dictate market trend; high valuations a concern, say experts

Ongoing quarterly results season, along with the release of macro-economic data on industrial output and inflation, will determine the trajectory of the key Indian equity indices in the week ahead.

Besides, market experts expressed concern over high valuations as well as global cues impacting FPI inflows.

However, healthy quarterly earnings combined with production growth and normalisation of supply chains will keep investors' sentiments high.

"FPI selling has abated for the time being. However, we need positive FPI flows for the markets to keep rising from here," said Deepak Jasani, Head of Retail Research, HDFC Securities. "A 17,613-17,757 band is crucial on the downside, while a breach of 18,013 could lead to more upsides."

On Thursday, during the hour-long 'Mahurat Trade Session', FIIs sold Rs 328.11 crore worth of stocks on the BSE, NSE and MSEI in the capital market segment.

In terms of corporate earnings, Siddhartha Khemka, Head - Retail Research, Broking & Distribution, Motilal Oswal Financial Services said: "Companies have largely delivered in line with expectation. Most companies have indicated of recovery in demand as the economy opened up although higher commodity and energy prices have exerted downward pressure on margins."

"Companies have taken price hikes to pass on the impact of commodity costs, and the impact of it on demand remains to be seen. However, valuations are still at a premium and would demand consistent earning delivery going ahead. Thus market might continue to remain under pressure till valuations get reasonable and global cues improve."

Furthermore, companies such as Motherson Sumi Systems, Britannia Industries, Bharat Heavy Electricals, IDFC, Indraprastha Gas, Mahindra & Mahindra, MRF, Power Grid, Coal India, Hero MotoCorp and Hindalco are expected to release their Q2 earning results in the coming week.

Apart from Q2 results, investors will look forward to the macro-economic data of IIP (Index of Industrial Production) and Consumer Price Index (CPI).

The Central Statistics Office (CSO) is slated to release the macro-economic data points of IIP and CPI on November 12.

According to Vinod Nair, Head of Research at Geojit Financial Services: "On a near to medium basis, investors should focus on defensive sectors in anticipation of higher market volatility."

"Sectors such as tourism, capital goods and infra due to the fiscal push and power (renewables) and manufacturing sectors that are bound to benefit from the full-reopening of the economy should be under the investors' radar."

In addition, Santosh Meena, Head of Research, Swastika Investmart said, "FIIs' behaviour along with inflation numbers from the US and China will remain key factors for the next week. After an extended weekend, Indian markets are likely to start a fresh week with a positive note on the global backdrop, however there is a risk of selling pressure at higher levels as we are underperforming the global peers where the near term texture has changed to 'sell on rise' from 'buy on dip'."