There Are More Legs To The Current Rally

Markets are at record highs and are keeping the investors in a frenzy, even as experts remained concerned on rich valuations. The exuberance in global equity markets is having its rub-off effect on the Indian markets as well. The liquidity driven rally in global markets is showing no signs of retracement yet. State Bank of India’s decision to reduce the savings account interest rate has triggered a rally in PSU banks. SBI had an above average CASA ratio of 45.58 per cent for the year ended March 31, 2017. The decision to reduce the interest rate on savings account will help improve the net interest margin for the bank, thus boosting its profitability. The interest rate cut by SBI augurs well for equity markets as the trend of rate cuts may help investments in equities to grow. 

The political turmoil in Bihar proved to be a storm in the tea cup and can be seen as a positive for the markets since the BJP emerged as the single biggest winner from the showdown between Nitish Kumar and Lalu Prasad Yadav. 

The FIIs were net buyers to the tune of Rs 3350.64 crore even as DIIs remained net sellers to the tune of Rs 380.27 crore. Dow Jones Industrial Average touched record highs gaining almost 1 per cent over the last 15 days. Nasdaq and S&P 500 were also seen hitting record highs, gaining 1 per cent and 0.5 per cent, respectively Hang Seng was among the best performers, up by nearly 2 per cent in the past couple of weeks. However, European markets underperformed, with DAX slipping by 3.4 per cent, CAC 40 down by 1.9 per cent and FTSE losing 0.5 per cent.

Gold prices gained by nearly 3 per cent in the past 15 days on the back of Federal Reserve’s announcement and increasing geopolitical tensions. 

The crude oil prices gained momentum in the second half of July and climbed almost 6 per cent in past 15 days to trade closer to $50 per barrel. 

Markets will be keenly watching the RBI policy announcement on August 2. The earnings season so far has been mixed, with some FMCG companies clearly showing weakness. With companies like Glenmark Pharma surprising on the positive side, market participants will be keenly tracking the performance of pharma stocks this earnings season. 

The US GDP data was below estimates, but it has not had major impact on global equity markets, even as the global GDP growth outlook remains positive. 

The normal monsoon, along with abundant liquidity in the system aided by solid corporate earnings growth in the US, is expected to keep markets in good shape.

Among the sectoral indices in India, BSE Bankex was the best performer, gaining 3 per cent. FMCG index was the worst performer, down by 4.2 per cent. IT index outperformed, along with Metal index. Broader markets, along with benchmark indices, were seen trading with a positive bias, with Sensex gaining 0.7 per cent and Nifty gaining 1 per cent.