INDIA IN ELITE CLUB-LIKELY TO SUSTAIN MOMENTUM

It seems that the Indian equity markets are in a sweet spot. At least the way indices are consistently moving northwards and hit the all time high levels in the preceding week it appears so. With an all time high levels for leading bench mark indices, the Indian equity markets achieved a remarkable feat in the preceding fortnight. With consistent northward movement, Indian equity markets entered an elite club of top ten countries with highest market capitalisation. With a market cap of USD 1.6 trillion, India stood at ninth position in top ten countries.

If we take a look at the performance of Indian equity markets in the preceding fortnight, improvement on macroeconomic front, on domestic as well we as global markets seems to be the prime factor. Let’s take a deeper look at the other factors that helped the Indices touch all time high levels.

If we take a look at the domestic factors, immediately aft er the announcement of state assembly poll results in Maharashtra and Haryana, markets entered the fast lane with expectations of Government taking the reforms on fast track. As expected, with no election in sight for next one and half year, the BJP Government has pressed the peddle with fixing up issues like coal linkage for power and cement sector, fixing up a new gas pricing formula and last but not the least clearing a few infrastructure projects which got delayed due to red tape. As an extended move, expansion of cabinet to further focus on reforms process was one factor that helped the indices move northwards. We expect further move on reforms in upcoming winter session keeping the markets buoyant.

Another factor was FIIs that were missing from the street in previous months; they are coming back to Indian markets. FIIs have INDIA IN ELITE CLUB-LIKELY TO SUSTAIN MOMENTUM been net buyers in all the trading sessions for the month of November till date. Noticeable factor is, this is despite the US Fed ending its monthly bond buying program (started at USD 85 billion in December 2012) completely. There were fears about scarcity of liquidity in emerging markets taking the indices down. However we had categorically stated that, this factor was already completely discounted and would not make any impact on emerging markets. With Japan and Europe planning for stimulus the liquidity would be maintained.

The quarterly results are in-line with street estimates and we have carried a detailed analysis of same in this issue. We had expected the results season to be a muted one and we have been proved right. We are expecting a better H2FY15 for the markets taking the indices northwards. As regards other factors, the crude oil price is still declining and trading even below USD 80 per barrel. It is an added benefit for India which is a net crude importer. We feel currently the macro factors are beneficial and hence we expect the Indian to continue their upward journey.