Earnings and the progress of the monsoon rains will be the focus for investors in India where the annual four-month rainy season has a huge say in determining farm output, rural incomes and the outlook for the economy.
Quarterly results from the top two software services companies were mixed last week, but there is optimism that other manufacturing firms will turn in a markedly improved show.
Consumer spending in India has been rising on the back of sharp wage increases and bonuses.
Bajaj Auto, India's second-largest motorcycle maker that also produces scooters and three-wheeled motorised rickshaws, will be in the spotlight as the company's board is set to consider a bonus share issue on Thursday, its first in 13 years.
Tomorrow, HDFC Bank, the No 2 private-sector lender which is also listed on Wall Street, is tipped to maintain its enviable record of more than 30 per cent profit growth.
Treasury boost
Banks in India are required to keep about a quarter of their deposits in government securities and a drop in bond yields in the June quarter will help treasury income. Demand for loans is expected to show good growth, indicating borrowers are less mindful of rising interest rates in a surging economy.
Maruti Suzuki, which sells more than half of all cars in India, was yesterday expected to report strong earnings after record sales in April and May.
Other big results include Bharat Heavy Electricals, Wipro, Dr Reddy's Laboratories, Indian Oil Corp, Hindustan Petroleum Corp and Jaiprakash Associates.
"People are upbeat and companies will have to live up to those expectations," said equity trader Ramnik Patel. "The outlook is optimistic, but the rains are crucial," he added.
The India Meteorological Department said that rains in the week to July 14 were 24 per cent below normal, which is bad news for many crops.
The June-September monsoon is the lifeline for irrigation farms in India, raising agriculture production and boosting incomes of about two-thirds of the country's 1.2 billion people that either live or depend on rural-related activity.
Shares in Tata Consultancy Services, which gets most of its revenue from the United States and Europe, jumped more than six per cent on Friday, taking the company's market value to Rs1.63 trillion (Dh128 billion) — the fourth biggest after Reliance Industries, Oil and Natural Gas Corp and NTPC Ltd — after the firm's quarterly profit rose more than a fifth, beating expectations.
Rival Infosys Technologies which had reported a surprising drop in earnings was dumped by investors.
The top-30 Sensex gained 0.7 per cent last week, its second week of gains, but there were signs of resistance.
Concerns that the United States economic recovery will be much slower than expected and debt-ridden Europe are major risks when trading resumes tomorrow, traders said. "The downbeat newsflow from Wall Street will cast a shadow," said trader Vinod Mhatre.
"But I did bet canny investors will plumb for growth and that is a big plus for India."
He could be on the dot as a BofA Merrill Lynch survey released last week shows that investors have gone heavily overweight on Indian stocks for the first time in more than a year, attracted by the country's domestic demand-driven economy as uncertainties cloud the outlook in the developed world.
The US bank's monthly fund managers' poll showed a net five per cent were now overweight on India, which is a big leap from February when 59 per cent were underweight.
Foreigners have bought Indian shares worth $8.65 billion since the start of January, data from the Securities and Exchange Board of India showed, a trend that should match the record $17.5 billion inflow in 2009.
The writer is a journalist basedin India.
