A Secular Rally

The bellwether Indian equity indices, the Sensex and the Nifty, added 2.55 per cent and 2.39 per cent respectively during the fortnight. Among the sectoral indices, the BSE Metal index (+7.61%) was the highest gainer followed by the Bankex (4.01%), while the BSE IT index inched marginally lower (-0.16%). 

The Indian equity markets traded firm during the past fortnight. Although initially, events like the whistleblower alleging unethical practices at IT major Infosys did weigh on sentiments, but the market staged a recovery led by some better than expected quarterly results of companies and reports hinting that the government is mulling over a review of equity-related tax rate rationalisation. Global cues also extended support to the market with expectations of the US-China trade conflict heading for a mutually conducive resolution through a negotiation process; also a third Fed rate cut this year raised expectations of increased FPI flows into Indian equities going forward.

The International Monetary Fund stated that the recent corporate tax rate announced by the government coupled with monetary policy stimulus by the RBI will likely aid a rebound in India’s GDP growth to 7 per cent, next fiscal.



The market could get a trigger if there are any crucial announcements with regards further tax sops from the government. The Prime Minister’s Office (PMO) and the Finance Ministry are reportedly working on tax consolidation measures to spur demand in the economy. These measures may include scrapping the dividend distribution tax (DDT), a revision of existing tax slabs, revising holding period of long term and short term capital gains (LTCG and STCG), and alterations in the securities transaction tax (STT).

The government has taken the pending decision to merge state-run telecom companies MTNL and BSNL as part of a Rs.70,000 crore revival package. There reportedly are other relief measures for the telecom sector as a whole on the anvil.

The bellwether Indian equity indices, the Sensex and the Nifty, added 2.55 per cent and 2.39 per cent respectively during the fortnight. Among the sectoral indices, the BSE Metal index (+7.61%) was the highest gainer followed by the Bankex (4.01%), while the BSE IT index inched marginally lower (-0.16%). The rally was secular without any market cap bias as the BSE Midcap index rose 3.27% and the BSE Smallcap index rose 3.84% over the fortnight.

Foreign Portfolio Investors (FPI) were net buyers in Indian equities to the tune of Rs.12468.96 crore while Domestic Institutional Investors (DIIs) were net sellers by Rs.2163.15 crore.

Global equity indices also added gains over the last fortnight with the Nasdaq, S&P 500 and the Dow Jones Industrial Average in the US surging by 4.25 per cent, 3.08 per cent and 2.58 per cent respectively.The European indices FTSE 100 (UK), the CAC (France) and the DAX (Germany) rose 3.06 per cent ,3.98 per cent, and 3.34 per cent, respectively. The Asian indices Nikkei (Japan), the Hang Seng (Hong Kong), and the Shanghai Composite (China) grew 3.10 per cent, 1.59 per cent and 1.27 per cent, respectively.

The INR strengthened against the USD during the period under review, ie from 71.15 to 70.80. The dollar weakened, primarily on account of the 25 basis point cut in interest rate by the Federal Reserve. Further, the US central bank governor expressed that the rate-cut cycle would now take a pause unless there is any significant change in macros and fundamentals of the economy, that demand otherwise.