The outcome of Greece’s referendum on Sunday and quarterly earnings will set the tone for Indian stock bourses in the coming week, with market pundits betting that strong fund inflows — both foreign and domestic — would cushion any adverse news.

Key stock indices climbed to their highest in 2-1/2 months on Friday, underscoring the confidence of investors ahead of crucial developments. The top-30 Sensex climbed 1 per cent in the week to 28,092.79, while the broader 50-share Nifty added 1.2 per cent to 8,484.90, both stretching gains into a third consecutive week.

Although the Greece debt crisis is largely factored in, there could still be a knee-jerk reaction if the vote goes against austerity measures and paves the way to a default.

Because domestic funds are rolling in cash, they are well placed to more than compensate for a slowdown in foreign inflows. Brokerages also believe that beaten-down sectors such as capital goods and infrastructure-related are poised for a rebound on the back of increased government spending.

“Undoubtedly, Greece will be a critical factor going into next week,” equity salesman Mehul Dalal said. “So, expect some turbulence, but it should be momentary. India is not directly exposed to Greece’s problems. For us, the quarterly results and comments on outlook by companies would be more decisive.”

TCS, Infosys

Tata Consultancy Services (TCS), the country’s top software services exporter and whose shares have the biggest market capitalisation at more than Rs5 trillion, will kick off the earnings parade for Sensex companies on Thursday.

The June quarter is usually a strong period for outsourcing business although annual wage increases tend to squeeze margins. Nearly all brokerages expect the top tier companies to report robust earnings, and fund managers would be watching comments on client budgets to gauge the potential for growth.

Manik Taneja and Ruchi Burde at Emkay Global Financial Services Ltd reckon that TCS’s revenue grew 4.2 per cent in US dollar terms during the June quarter, with negligible cross currency tailwinds.

“Reported profits expected to increase by 39 per cent quarter-on-quarter to Rs53.7 billion (Dh3.1 billion),” they wrote in an earnings preview report, pointing out that in the March quarter the profit was reduced by one-time bonus payment of Rs26.3 billion to employees.

“EBITDA (earnings before interest, tax, depreciation and amortisation) margins are expected to contract due to wage inflation and visa cost, partly offset by currency and efficiency gains,” said Vibhor Singhal and Deepan Kapadia, sector analysts at PhillipCapital, who also see revenue rising 4.2 per cent in dollar terms on quarter.

Infosys Ltd, the No 2 Indian software services exporter which is also listed in New York, is scheduled to release results on July 21. HSBC Securities and Capital Markets (India) Private Limited analysts Yogesh Aggarwal and Vivek Gedda said that the company’s top management was “very confident” at recent investor and analysts meets of achieving 2015-16 guidance.

This would suggest that Infosys, which had faced strong headwinds over some quarters, was on the road to picking up momentum. Nonetheless, revenue growth of less than 3 per cent should be negative for the stock, the HSBC analysts said.

Capital goods, engineering

Signs of green shoots and modest growth are seen for sectors linked to infrastructure and manufacturing, both of which have been going through tough market conditions on the heels of sluggish investments happening in the economy.

For a change, the government has stepped up spending — it’s has spent 13 per cent of 2015-16 budgeted plan during April-May, compared with 10 per cent in the same period last year, while non-plan expenditure has dropped by 9 per cent.

Government spending has been focused on roads, rural development, agriculture and human resource, according to Abhay Laijawala and Abhishek Saraf, analysts at Deutsche Capital.

“By far the single biggest year-on-year increase has been seen in roads, where plan spending has risen by 1,275 per cent, with the government already spending 22 per cent of its annual 2015-16 budget in first two months (versus 2 per cent of annual budget in same period of last year),” they wrote in a report.

“Continuation of spending momentum — seen in the first two months of the fiscal year — is likely to result in a strong and visible impact on macroeconomic data and on corporate earnings as economic activity begins to pick up.”

They said that investors should realign their portfolios in line with the shift in government policy from consumption to infrastructure creating investments. Engineering, construction and infrastructure-linked companies would be big beneficiaries.

“Larsen and Toubro, Cummins India, Concor, Siemens India, UltraTech, Coal India and IRB are our preferred sector picks,” the analysts wrote.

Brokerage Sharekhan expects Larsen & Toubro, the country’s biggest engineering and construction company, to report double-digit earnings growth. “Given the strong order book position and consistent order inflow in the past, we expect a revenue growth of 12.4 per cent year-on-year.”

It estimated operating profit margin at around 10.6 per cent, and projected net profit at Rs8.37 billion, up 16 per cent from the same quarter a year earlier.

Hindalco, PVR

According to Navin Gupta and Indrajit Agarwal at Goldman Sachs, aluminium maker Hindalco offers compelling risk-reward after the recent underperformance of its shares.

The company faces an increase in coal prices even as it battles a drop in rates for aluminium, which means its earnings are headed for a squeeze. As a result, Goldman cut its earnings per share estimated by 5-9 per cent over the financial years 2015-16 to 2017-18.

It lowered its 12-month price target for the Hindalco share to Rs166 from Rs182, and maintained a buy on the stock, which closed at Rs110.55 on Friday.

The analysts expect 17 per cent EBITDA on a compounded annual growth rate basis during the financial years 2015 to 2018 on capacity ramp-ups in India, higher margins at its Novelis unit that caters to the auto industry. “Hindalco is past peak capex and we expect significant deleveraging.”

PVR, which runs cinema chains, is set to report strong earnings on the back of best-ever occupancies, brokerage IDFC said. Blockbuster Bollywood movies such as Tanu Weds Manu Returns, Piku, Dil Dhadakne Do and Gabbar is Back helped boost June quarter earnings, as also Hollywood films including Avengers, Fast & Furious 7, Jurassic World, it said.

The writer is a journalist based in India.