Ahead of Budget 2022, global trends, quarterly earnings to guide equity market

Ahead of holiday-shortened week on account of Republic Day as well as highly volatile domestic market amid investors awaiting the outcome of the upcoming Budget announcement, equity markets will look for directions from global trends, ongoing quarterly earnings and investment patterns of foreign institutional investors (FIIs), according to analysts. 

The analysts have also notified that the equity markets may encounter volatility amid the scheduled monthly derivatives expiry. Meanwhile, the equity markets will remain closed on Wednesday on account of ‘Republic Day’. Additionally, the domestic market is expected to remain highly volatile with investors awaiting the outcome of the upcoming Budget announcement.

Ajit Mishra, vice-president (research) of Religare Broking said, “this week is a holiday-shortened one and it’s going to be critical due to the list of events and data that are lined up. First, markets will react to the earnings of two index heavyweights — Reliance Industries and ICICI Bank.”

Reliance Industries Ltd on Friday reported its best-ever quarterly performance in October-December 2021, helped by an uptick in two ‘Rs’ — refining and retail, a recent tariff hike accelerating growth at Jio and a one-off gain from the sale of US shale gas business.

While private sector lender ICICI Bank on Saturday reported a nearly 19% jump in its consolidated profit to 6,536 crore for the quarter ended in December 2021, helped by higher net interest income (NII) and lower provisions.

As of now, the uncertainty around the quantum of a rate hike by the US Federal Reserve is spooking markets the world over and participants expect clarity in the scheduled FOMC (Federal Open Market Committee) meeting outcome on January 26, Mishra added

“Amid all, the monthly expiry of January month derivatives contract would keep traders on their toes,” he said.

Noting that ahead of Budget, sector-specific expectations will further add to the choppiness, Mishra said, “on the earnings front, we have some big names like Axis Bank, Kotak Mahindra Bank, Maruti, Cipla, Vedanta and Larson & Toubro who will announce their results along with several others.”

Just last week, the weak global sentiments wreaked havoc in the volatile domestic market. Last week, the Sensex lost 2,185.85 points or 3.57 per cent, while the Nifty slumped 638.60 points or 3.49 per cent in tandem with a sell-off in global equities amid concerns over inflation and monetary policy tightening.

While indices witnessed a 4% last week, just as FPI booked profits across large-caps and select high-quality mid-caps.

S Ranganathan, head (research) at LKP Securities, said, “rising oil and input prices coupled with a moderating rural economy kept investors watchful as markets turned volatile.” It is highly likely that the market trend will also depend on the rupee-dollar movement and Brent crude.

Siddhartha Khemka, head (retail research) at Motilal Oswal Financial Services Ltd said, “results from heavyweight Reliance Industries and ICICI Bank over the weekend would provide market direction on Monday.” Additionally, the other companies expected to announce their earnings this week are Federal Bank, BHEL, Canara Bank and PNB.

Vinod Nair, head (research) at Geojit Financial Services, said, “as the recent earnings failed to excite the market, the earnings outcomes this week will be a key factor in determining investor confidence.” 

Shrikant Chouhan, head of equity research (retail) at Kotak Securities, said, “Investors’ focus will be on the upcoming Union Budget, earnings season and state elections in India.”



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