Markets Get A Breath Of Life

Global developments and the initiation of the policy reforms processes on the domestic front have had a favourable influence on the Indian markets. After a short span of consolidation, the markets are back on a north-bound journey, says Saikat Mitra

The last fortnight was indeed a very happening one as far as the markets are concerned. Both investors and traders received some respite as the markets witnessed decent gains over the last fortnight. The reforms process on which the market has been banking greatly on has finally been finally flagged off. This was expected, with Chidambaram taking charge of the Finance Ministry. Key moves like increasing the diesel prices by Rs 5 per litre and restricting the number of subsidised LPG cylinders to six per year will eventually help the oil marketing companies, which are already reeling under the pressure of under-recoveries. All these steps are likely to reduce the subsidy burden on the exchequer.

The much talked-about FDI in multi-brand retail and aviation has also been given the green signal. The process of divestment of PSUs has been expedited, and the target of Rs 30000 crore for the current fiscal looks achievable. The Sensex (+7.10 per cent) and Nifty (+7.35 per cent) witnessed pretty good gains in the last fortnight.

Index	17-Sep-2012	5-Sep-2012	% Change
Sensex	18542.31	17313.34	7.10
S&P CNX Nifty	5610.00	5225.70	7.35
BSE - 100 Index	5570.21	5214.66	6.82
BSE - 200 Index	2249.53	2110.87	6.57
BSE - 500 Index	7016.59	6595.55	6.38
NSE - CNX 100	5454.35	5100.75	6.93
NSE - CNX 500	4383.10	4115.35	6.51

Index	17-Sep-2012	5-Sep-2012	% Change
Shanghai Composite	2068.10	2037.68	1.49
FTSE	5893.52	5664.88	4.04
Dow Jones Ind Avg	13553.10	13035.94	3.97
Nikkei	9136.61	8679.82	5.26

There were severe concerns about the worldwide slowdown, and economies across the globe were desperately looking out for some triggers. Last week, we saw the developed economies coming forward and taking charge of the process, to unveil some measures that will help the global sentiment to improve. The ECB President Mario Draghi announced an unlimited bond purchase, which has swung the Euro zone markets to their six-month highs. Also, the US Federal Reserve has come out with the keenly awaited QE3 in the form of open-ended purchases of USD 40 billion of mortgage debt a month. These are indeed bold steps that will enhance the confidence as well as the risk-taking appetite of investors.

Back home, the RBI has cut the CRR by 25 basis points, taking it from 4.75 per cent to 4.50 per cent. The central bank, though, has opted to keep the repo rate unchanged at eight per cent. In its press release, the bank has said that the recent developments in the US and Europe have addressed the short-term growth and risk issues. However, it has cautioned that higher liquidity will push up the global asset prices, particularly the commodity prices.

On the domestic front, almost all the sectoral indices have closed in the green, barring one. The BSE Realty index, which went up by more than 15 per cent, followed by the BSE Capital Goods index (+11.71 per cent) and BSE Bankex (+11.43 per cent) were among the major outperformers. With the markets witnessing a better run and an increase in the risk appetite of the investor fraternity, the limelight has now somewhat shifted from the safe havens. The BSE FMCG index is the only one that has closed in the red the last fortnight, declining by more than three and half per cent. The BSE HC index also remained flat in the same period. The money inflows remained strong, with FIIs pumping in Rs 5935 crore. DIIs ended the fortnight in the red, selling off stocks worth Rs 151 crore in equities.

Going forward, we expect the markets to trade with a completely bullish bias. More reforms to come? Maybe.

Index	17-Sep-2012	5-Sep-2012	% Change
BSE Mid-Cap	6316.02	6023.53	4.86
BSE Small-Cap	6697.66	6391.36	4.79