Market briefing – Factors affecting market movement, currently

26 Apr 2023 , 02:42 PM

Some IT stocks saw correction last week. This happened after the March quarter results of TCS and Infosys came. Infosys lowered its revenue growth estimate for FY 24 to 4%-7%. The company said that US banking crisis may hurt its performance adversely in FY 24. Indian IT companies are heavily dependent on the US market for their revenues. An economic recession there will result in client companies cutting down their IT and software expenditures too. This in turn will have an adverse impact on the performance of Indian IT companies. Infosys said that it already saw a number of project cancellations by client companies in the March quarter.

Pharma stocks also came under selling pressure in the past few days. This happened because the risk of USFDA issuing adverse observations seems to have increased for Indian pharma companies. USFDA recently issued a severe adverse observation against Sun Pharma. 

Over the next few weeks, the course of the market will also be determined by corporate results that will come out. Some banks such as IndusInd and Bank of Maharashtra have posted good March quarter results. We are therefore seeing some rally in banking stocks. Nifty Bank index is currently trading at a P/E ratio of 16.17. This is lower than the P/E ratio of stocks of companies of a number of other sectors. PSU bank stocks are even trading lower, at a P/E ratio of just 9.08. So, the upside potential is there in these stocks.

Some FMCG companies may post results in the March quarter that are below expectations. This may happen because rural demand has still not recovered fully from the shock of Covid lockdowns. If this happens then some FMCG stocks may see headwinds in the near term. 

Oil prices will continue to have an impact on India and Indian economy. In the past few days oil prices have declined because of  the expectation of worsening of global economic slowdown, in spite of rising demand from China. Any decline in oil prices is always a favorable factor for the Indian economy. It will be a favorable factor for the stocks of oil marketing companies.

Global cues will continue to have an important impact on Indian stock markets. In US, large banks have posted good March quarter results. Net profits of JP Morgan Chase, Wells Fargo, Bank of America and Citi, all went up on year-on-year basis in the March quarter. But the crisis is with the smaller and regional banks. And one such bank, First Republic Bank, has disclosed that it saw $100 billion in withdrawals from customer deposits in the March quarter.  Any sign of worsening of US banking crisis can derail the Indian equity markets too.