Economic Policies From Oval Office And GST Meet To Direct Markets

Dalal Street welcomed the sound Union Budget 2017 presented by the Finance Minister with open arms as market rallied to a fourmonth high. Domestic markets were equally supported by buoyant global equity markets which traded higher in the past two weeks backed by overall good earnings.

Main triggers in the past two weeks have been primarily quarterly earnings as well as global cues, especially those emanating out of the United States as analysts sit down to decode the new administration’s economic policies in the coming months and years.

Indian benchmark indices continued their positive momentum as both Nifty and Sensex generated returns of 2.70 and 2.47 per cent, which was in line with other global indices for the period under review. The mid-caps and small-caps outperformed the broader market indices as they delivered returns in excess of 3.5 per cent. On a sectoral basis, realty, IT and Bankex were the biggest gainers for the period under review as they gave returns of 7.5, 6.05 and 4.10 per cent, respectively. 

On the losing side, Metals index corrected marginally, post the stupendous rally witnessed in all the metal stocks. Looking at the fund flow scenario, it is good news for the domestic equity markets as FIIs pumped in close to Rs.2650 crore, while the DIIs bought equities worth Rs.487 crore in the past two weeks. 

The global markets traded at new highs in the last few weeks as all the major global equity markets delivered positive returns, with the US markets beating all the other developed markets. It was also a historic week as S&P 500 index reached USD 20 trillion in market cap for the first time ever as it continued to hit new highs on a daily basis. In commodities, crude oil traded in a narrow range of USD 50-55. 

In economic data, India’s retail inflation decelerated in the month of January to 3.17 per cent from 3.41 per cent, primarily supported by lower than expected food inflation. Wholesale price inflation (WPI) index shot up to a 2.5 year high of 5.25 per cent in January. Auto sales numbers for the month of February were more or less in line with street expectations. Industrial production for the month of December also contracted to 0.4 per cent in the month of December 2016, weighed down by the negative impact of demonetisation.

Going forward, all eyes would be glued to the GST Council meet on February 18, along with the last batch of quarterly earnings to be reported by corporates. Also, the capital markets are also likely to track global events, especially with respect to the new economic policies of the Trump administration.