The last week saw turbulence in the guidance of a global Indian IT giant. They marked their guidance down taking their stock down sharply. Domestic IT companies had however not dropped their guidance in their earnings calls done weeks earlier. When one company, and especially a large one, drops its guidance, it is natural for markets to worry about the sectoral outlook itself.

This will mean that the analysts’ enthusiasm and institutional outlook will see a distinct pause till more clarity emerges. People will simply not stick their necks out. The problem with our market is that sectoral worries are pausing analyst and manager bullishness in several sectors. First, it was pharma, followed by NBFC which in turn caused a ripple effect in the auto sector. Consumption has its share of valuation driven woes.

All this will cause a trending down of expectations. The weakening guidance trend will definitely trigger a chain of earnings downgrades over the next few months unless we see a dramatic turnaround. On the face of it, several sectors are heading toward a pause in market enthusiasm. Clearly, it is political guidance that is keeping the markets up for the moment.

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