Catch The Pulse Of The Market

The indices have been reflecting the hope that seems to be gradual building in the market. The long-pending reforms that could set the market on an upward trajectory are expected to come in following the Presidential elections, says Saikat Mitra.

As we have stated earlier in this column, there is some sense of optimism budding in the markets. We are very happy to state that we were proved right on that count, which is evident when we see the performance of the Sensex and Nifty for the last fortnight. Both the indices went up by more than three percentage points in the aforementioned period. On the broader markets, the BSE Bankex has shown the best performance with a gain of over six percentage points in the last fortnight, followed by BSE Realty (+6.33 per cent) and the Consumer Durables index (+5.85 per cent).

As our cover story suggests, this is the time for warming up. This is quite evident from the kind of inflows from the FIIs. In the last fortnight, FIIs have pumped in Rs 5814 crore into Indian equities. With the change in the Finance Ministry, the sentiments have become optimistic. Also, it is viewed that after the Presidential polls, the long-awaited bold steps towards reforms will be taken up by the government. In the past fortnight, we have seen the People’s Bank of China (twice in the past 30 days) and the European Central Bank slashing the interest rates to bolster growth. Now, the RBI will also be expected to follow suit and move ahead with rate cuts when it meets on July 31, 2012. All eyes will also be on the US Federal Reserve when it meets on 1st August, 2012. There is still some speculation going on with regard to whether it will move ahead with some kind of stimulus.

The experts we have spoken to are of the opinion that at a 10-year average PE, investors should take this opportunity to enter the market and accumulate stocks in a systematic manner. The falling crude prices are certainly a positive sign for the Indian economy. During the presentation of the Union Budget, the average price of crude oil was taken at more than USD 100 per barrel, but as of now, it has fallen below this mark. This will bring some respite to the ailing oil marketing companies, and will also help to contain the increasing fiscal gap.

At present, we are at the beginning of the earnings season. Among the Large-Caps, HDFC has already declared its first quarter results. The results were in line with the street expectations, and the company has been able to grow its loan book on home loans at a faster clip than the industry average. As we move forward, we will see more companies coming out with their numbers, which may play a vital role for the market’s movements. Attention will also be trained on the data that is to be released, like the IIP and WPI numbers.

We believe that we are likely to see certain steps that will set the balls rolling going forward, and some smart rallies in the markets cannot be ruled out.