Only 3 days for the Market this week

Monday, April 14, 2008 | | |

With just three trading days this week (truncated by the birthdays of Babasaheb Ambedkar and Lord Mahavir on either end), the prognosis is one of weakness.

Piled-up pessimism after the Dow Jones plunge on Friday and a minefield of a results season could trigger a gapdown on Tuesday morning, analysts said.

Of course, if the Dow rebounds on Monday night, things will be better on Tuesday.
The index plunged over 2% on Friday following disappointing results by that paragon of stability, General Electric.

Ketan Karani, vice-president-research, Kotak Securities, believes this is symptomatic of what happened in the capital goods sector in India — “it’s happening around the world”.

With two big results lined up —- that of Infosys and Wipro — Karani said the trend will be weak.

Asking investors to remain underweight, Credit Suisse analysts Nilesh Jasani and Arya Sen said earnings confessions are inevitable this season. So guidances from corporates will be the key.

“We wish corporates would realise the strength of the cyclical forces at play and provide conservative estimates. Such a scenario might be negative for stocks in the near-term but would create medium-term upside for the market by creating the room for positive surprises,” Jasani and Sen said in a note to clients last week.

“If Indian companies help investors form more realistic expectations and remove the fear of shocks —- of the kind that we recently saw from capital goods companies —- the market could form a bottom and recover later. Our conversations with corporates and expectations from guidance, however, do not suggest that this is going to be the case. Investors should prepare for an atrophying market as a result,” they said.