Post RBI Policy, All Eyes Now Will Be On The Union Budget

Indian markets in the last 15 days have been busy digesting the new developments on the demonetisation front and its impact on various sectors. It is widely believed within the financial analyst community that the real estate sector may suffer due to demonetisation move, along with the banks who may take a hit in profitability. Since November 22, metal index has been the best performer by clocking 6 per cent gains, followed by realty index which gained 5.71 per cent. In the past two weeks, Indian markets managed to outperform the global indices and almost all the sectoral indices traded in the green, except the Bankex. During the similar period, NASDAQ, on the global front, was one of the worst performing index followed by FTSE 100. CAC40 was the best performing global index, which clocked return of 1.84 per cent in the past two weeks followed by 1.20 per cent return delivered by Dow Jones Industrial Average (DJIA).

Japanese markets managed to outperform its global peers, with the Nikkie managing to deliver one per cent return. The FIIs were net sellers in the past two weeks to the tune of Rs.28,846.69 crore. DIIs, on the other hand, have been net buyers in the equity markets in India. DIIs net buying was to the tune of Rs.7,238.9 crore. Political uncertainty in the Europe, the pending US Fed rate (hike) decision, rising crude oil prices along with weakening Indian rupee could well be the concern areas for the Indian equity markets. Going forward, food inflation is expected to ease and may pave the way for interest rate cut once the demonetisation situation is normalised.

The banks are faced with low loan growth phase postdemonetisation. It will be very important to see how fast banks get back on track and start disbursing loans to their clients. Given the lower stock prices postdemonetisation, the valuations do look more attractive now than a month-andhalf back when the Sensex was trading at levels close to 29000. After they are done with their selling spree, the FIIs may turn net buyers into Indian equities. Bargain valuations, normalisation of environment post-demonetisation and union budget expectations will decide the course of market action in the coming days.