MARKETS TO CONSOLIDATE!

The Indian equity markets gathered some momentum in the preceding fortnight and most importantly managed to break the range it was stuck into. Since the announcement of election results, the benchmark indices have been highly range bound and have been seeking triggers. In our preceding issue, we had categorically stated the RBI policy announcement and expectations on monsoon front by the IMD.

 As regards to the outcome of the triggers, markets got a relief when RBI maintained a status quo at its bi-monthly policy. It was in-line with street expectations, as most on the street had expected the RBI to hold rates at 8 per cent. With inflation consistently remaining above the comfort levels of RBI, it was bound to happen. There were quite a few positives from the policy statement. The most important one being, RBI categorically stating that there would not be any rate hike going ahead. Further the policy announcement also indicated a possible room for rate cut towards the second half of fiscal year 2015.

 While the RBI provided some amount of relief, the new government has also started its work with a bang. We are of the opinion that, the right way to resolve issue is the policy of coming out with top ten addressable points first and then taking an immediate action. First on the list will be Coal India, with ministry of coal presenting its findings. We are of the opinion that, if the issue regarding the coal is addressed, many sectors like coal, steel and even cement would get a positive push. Apart from this, FIIs have also remained consistent buyers in the preceding week. There were few trading sessions in the last week of May 2014 when the FIIs turned marginally negative. This was just ahead of the RBI policy. However the month of June has started on a very positive note. Till date FIIs were the net buyers in all trading sessions in June 2014 to the tune of `9638 crore. Now, on YTD basis, the FIIs are net buyers to the tune of `55442 crore. This clearly indicates the bullishness of FIIs towards Indian equities. All these factors took benchmark indices northwards and Sensex managed to close above the psychological mark of 25000. Even Nifty closed above the mark of 7600. However, the star performers were mid-cap and small-cap indices which clearly outperformed the benchmark indices.

 Going ahead, the market is likely to face a lot of consolidation. The key triggers like RBI policy, quarterly results announcement and even initial days of government workings are already been discounted. Hence, with no immediate triggers and aft er a brisk up-move, we expect markets to consolidate further from here on. DS Performance