The June derivatives series ended with a whimper. Throughout the month the market searched for direction but couldn’t find one. The Sensex came reasonably close to its all time high but still hasn’t quite been able to take it out.
On the way down, the Nifty slipped to 4,100 but didn’t break that either. Perhaps the market needs a trigger to nudge it out of this range. June, after all, was not a month of big news flow, but come July it will pour news. Maybe, after a month of consolidation, we will find direction in July, either way.
Earnings will start pouring in from around the 10th of the month. This is a crucial reporting season. After several quarters, opinion is a bit divided on what companies will report this time.
Fears abound of a poor start to the season with technology companies disappointing. That truly will set the tone. If Infosys comes out and says that its annual guidance isn’t under threat despite the rupee, that might fillip the sector and the market.
Autos will disappoint, that is pretty much in the price. Cement should not and after the FM’s recent promise of non-intervention a lot of positions have been rolled over to the July series. Importantly, this earnings season will signal whether companies are bracing themselves for the earnings slowdown that analysts have been predicting or whether FY08 can still deliver 18-20 per cent earnings growth.
If there are indeed some cracks opening up, they will be visible this quarter. The market will be watching very closely.
The interest rate scare has receded somewhat in June. Though the dip in inflation is a relief, it will be important to note what the RBI governor has to say in July about monetary policy and the rupee.
Globally too, with sub-prime mortgage fears resurfacing and bond yields at elevated levels, the next FOMC meeting will be interesting. There are lots of potential triggers in July. It is tough to predict though which way these triggers will lead us. Very much like a game of snakes and ladders. In July we will either climb the ladders or slip on the snakes.