After reeling under heavy selling pressure amid bearish global cues in the recent past, the Dalal Street is likely to see the focus shifting back to domestic factors with the latest quarter earnings season set to start with IT bellwether Infosys' figures coming this week.
Besides corporate earnings and their prior expectations, the marketmen also expect local factors such as political developments and macroeconomic issues like inflation to play a significant role in the coming days.
While single-day movement of hundreds of points are expected in the benchmark Sensex, experts are also anticipating that the BSE index would remain volatile and hover between 12,000-14,000 points in alternate bouts of gains and losses.
Some analysts expect IT companies to report a good set of results, buoyed by a stronger dollar versus Indian currency, but others believe that slowing economic growth in their major markets like the US and Europe could also reflect in their latest quarter results.
Among other sectors, the forecasts are bearish for auto, real estate and manufacturing industries due to factors such as hardening interest rates.
Infosys would be the first major company to announce its March-June quarter results and the analysts expect the company to kick-start the season with higher revenues for the first quarter of financial year 2008-09. Infosys is scheduled to disclose its figures on Friday, July 11 and would be followed by other companies in the coming days.
Markets are expected to remain volatile in the coming week, although there could a brief counter-rally after the fall seen over the past week, brokerage firm SMC Global's Rajesh Jain said.
The broad-based index Nifty, which ended at 4,016 points on Friday, is expected to move between 4,200-3,800 points, while the Sensex is expected to hover around 12,600-14,000 level, Jain said.
The Sensex ended the past week with a fall of 2.5 per cent or about 350 points, even though it rose 360 points on Friday to close at 13,454 points.
On hardening interest rates, SMC Global's Jain said there could be no significant impact as the increase in lending rates by various banks has already been discounted in the last couple of months, he added.
About the corporate earnings prospects, analysts at brokerage firm Emkay Global Financial Services said IT firms including Infosys, Satyam and Tata Consultancy Services are projected to record sequential growth in revenues for the June '08 quarter.
However, the auto companies are widely expected to post a weak set of results for the first quarter.
"Though the sales volume growth during the quarter is better than that of Q4 of FY 2008, the rising raw material cost would exert pressure on the profitability," analysts at brokerage firm Sharekhan said in a report.
While some analysts anticipate a positive boost on the domestic front from a good monsoon season, the continuing weak global cues are also expected to continue playing spoilsport.
The skyrocketing oil and commodity prices and sustained selling by FIIs may continue exerting pressure on the bourses.
FIIs have pulled out more than Rs 1,000 crore this month alone, while since beginning of the year they are estimated to have made a net outflow of more than Rs 25,000 crore from Indian equity market.