Indian stock markets on Friday could well reverse the massive losses of the previous day caused by expectations of an interest rate hike by the US Fed Reserve that saw the benchmark indices — BSE Sensex and NSE Nifty — plunge 1.56 per cent. The two triggers that could lead to a rally are September retail inflation data and upbeat TCS results for September quarter.
Retail inflation in September improved to a 13-month low of 4.31 per cent from 5.05 per cent in the previous month. Food price inflation, the main contributor to overall inflation in the past few months, declined to 3.88 per cent during the month from 5.91 per cent in August. Analysts view this as not only positive, but also raising the scope for another rate cut of 25 basis points.
Secondly, Tata Consultancy Services (TCS), India's largest software services exporter, posted decent growth in consolidated net profit and revenues for the September quarter on a year-on-year (YoY) basis.
While net profit rose 8.4 per cent to Rs. 6,603 crore, revenues were up 7.8 per cent to Rs. 29,284 crore. The company also declared interim dividend of Rs. 6.50 per equity share.
These two factors could well reverse the drastic fall of Thursday when the BSE Sensex closed 440 points, or 1.56 per cent lower, at 27,643, while the NSE Nifty ended the day at 8,573, down 135 points.
On Thursday, TCS shares closed 2.17 per cent lower at Rs. 2,328.50 apiece, while Infosys gained 2.14 per cent to end at Rs. 1,052.05.
However, Q2 results of Infosys would influence market sentiments on Friday. The Bengaluru-based IT software services exporter had already hinted at a possible downward revision of revenue guidance for the year.
On July 15, the company, while declaring its Q1 results, had lowered its FY2017 revenue guidance to 10.5-12 per cent from 11.5-13.5 per cent earlier, triggering a 10 per cent fall in share price.
In September, Vishal Sikka, CEO of Infosys, had hinted at another downward revision triggered by factors such as Brexit.
"What I could say is that we see that our Q2 growth is going to be higher than the Q1 growth, but we do see risks that would get us towards a territory of downward revision of guidance because the atmosphere during the course of Q2 has worsened compared to what we saw in the beginning of Q2. And you see the example of RBS, it is one such example," told analysts during a call last month.
The company's June 2016 quarter consolidated net profit was $511 million on revenues of $2,501 million, translating into revenue growth of 10.9 per cent on a year-on-year (YoY) basis and 12.1 per cent in constant currency terms. The operating margin came at 24.1 per cent.