Positivity Is Here To Stay

It was supposed to be a make or break kind of fortnight for the equity markets. The reason being there was a lot of caution being witnessed on the global front as well as the domestic front. As we had categorically mentioned in our preceding market view column the factors like expected hike in interest rates by US Government earlier than the street estimates, issues of Euro zone witnessing another round of trouble and slower than expected growth rate of China took the global indices southwards. However we were quite confident of our term bullishness and also backed our expectation with increased GDP growth estimates by IMF.

With this negativity on global front, the market sentiments had turned sour and Indian markets were also witnessing pressure. Markets needed some solid reason or support to remain floated. Apart from this there were certain other factors also that made the preceding week an important one. Foremost reason being assembly elections scheduled in states of Maharashtra and Haryana.

These two states were important for the BJP government to show its strength and make a solid statement in terms of taking the reforms process on fast track. Ahead of the assembly elections, government was going a bit slow (as compared to market expectations) on reform process.  With a clear cut majority in Haryana and also emerging as a single largest party in Maharashtra, BJP proved that it has got support at all levels.

With clear majority in these states everyone on the street is expecting the reform process to be put on the fast track. Rather with hardly any elections scheduled for next 18 months, it is likely that the government starts reform process. And with partial de-regulation of diesel prices and fixing up formula for gas pricing, the government started with a bang. Even clearance of few road blocks for power sector for capacity of more than 91000 MW added to the positivity. We are expecting a lot more on GST and DTC road map and even insurance bill front.

No wonder the equity indices responded positively and with some positive cues on the global canvas sentiments changed completely. And from choppy trades in earlier fortnight markets entered the zone of consistent upward trajectory. Quarterly results are in-line with street estimates and hence capped the downside for the indices. FIIs were net sellers at the start of the fortnight; however the intensity of selling has declined over the period and some buying was witnessed in last few trading sessions. Going ahead we feel positivity is here to stay as global factors are also improving. Bloomberg report suggested that, almost 79 per cent of S&P 500 companies that have reported so far have beaten earnings estimates, while 62 per cent have surpassed revenue projections. Profit for S&P 500 companies rose 6.3 per cent in the third quarter and sales increased 4.1 per cent, analysts predicted. We expect positivity in the market to continue with mid-cap and small-cap expected to outperform leading indices.