Surging foreign portfolio investments and an expected jump in quarterly earnings should keep Indian shares firmly on the upward trajectory in the near term, and cushion any impact from another interest rate increase that is in the offing.
Infosys Technologies, the country's second-largest software services company that gets more than half its revenue from the US, will kick off the earnings parade on Tuesday and investors will be watching its guidance for the new financial year.
Analysts are betting the blue-chip company, which has always been conservative with its projections, will forecast 12-15 per cent growth in 2010-11 revenue in US dollars thanks to a revival in technology spending.
For more than a decade outsourcing companies had posted annual earnings growth of at least a third, making their shares among the most coveted.
Challenges
The world financial crisis in 2008 slowed the trend, and although business is picking up again the companies face formidable challenges from an appreciating rupee and rising wages.
Quarterly results of other sectors are set to reflect a massive improvement. Brokerage Prabhudas Liladhar has estimated automobile companies will report a more than doubling of earnings, while auto parts firms should see profit rising 126 per cent.
Sugar producers are tipped to top the table, with earnings soaring 461 per cent helped by record prices, followed by property firms with 209 per cent, the brokerage said in a report.
Others include: metals seen up 72 per cent, drug makers up 55 per cent, media and entertainment up 45 per cent and financial firms up 20 per cent.
On Friday, the Society of Indian Automobile Manufacturers said car sales in March jumped a fifth from a year earlier to 155,600 units, while truck and bus sales grew 61.2 per cent to 67,362. Total vehicle sales in 2009-10, including motorcycles and scooters, soared 26.4 per cent to a record 12.3 million units, erasing the previous high of 10.12 vehicles in 2006-07.
"Expectations having been running high on earnings for some time and they are already in the prices," said equity trader Kevin D'Souza. "The focus will be on the outlook."
The widely tracked top-30 Sensex climbed 1.4 per cent last week, taking gains since the start of March to about nine per cent. The index has risen for nine consecutive weeks, the longest run in almost a year, and looks set add more on the back of foreign buying.
Overseas investors have been moving cash into Indian equities and debt in a big way, drawn by the prospects for robust economic growth and rising returns. Data from the Securities and Exchange Board of India showed foreign equity inflows of $5.35 billion so far in 2010, while debt instruments attracted $4.73 billion.
Indian expansion
The government expects India's economy, the third-largest in Asia after Japan and China, to expand 8.5 per cent in the current financial year that started on April 1, and aims to boost growth to 10 per cent in coming years.
February industrial production (IP) data will be released tomorrow and investment house Macquarie has forecast an annual rise of 16-17 per cent, while March wholesale price inflation due on Thursday is seen at 10-11 per cent.
"We expect the IP details will reinforce that the growth momentum remains solid," Macquarie analyst Rajeev Malik wrote in a report. "Food inflation will come off further, but non-food inflation is becoming a bigger worry."
The Reserve Bank of India (RBI) will likely raise interest rates and the cash reserve ratio (CRR) by 25 basis points each before the end of June, with at least one of the moves coming in the central bank's April 20 policy review, he said.
The writer is a journalist based in India.
