MARKET EYEING REFORMS AND RAJAN

The Indian equity market remained positive during last fortnight on the various pro-active steps taken by the Indian government. Further, on global front too, all major indices gained handsomely during the same period. The direction of the market going ahead will completely depend upon the reform push by the government during the winter session. The market has been very optimistic about the new government’s intent to push the growth of the economy; the investors will definitely become unhappy if the government fails to push the reforms in coming days.

The winter session of the parliament has started on November 24. The government has already shown its focus to push the reforms to grow give impetus to the Indian economy. The government has lined up Insurance law amendment bill to enhance FDI limit in insurance sector. Further, the government is also pushing revolutionary goods and service tax bill to unify the indirect tax across the country. The government has planned to further simplify and amend the land acquisition bill to expedite the country’s infrastructural developments. We have covered the expected reforms to be finalized in this winter session in our cover story of this issue.

The fortnightly rally in the domestic market was primarily because of the government’s give clearances to stuck projects and reforms. The government has finalized the gas pooling plans which will enable power plants to draw fuel from producers anywhere and enter into swap arrangements. Further, the market regulator in its pro-active step streamlined the definition of insider trading and delisting price which gave confidence to the investors. Though this revamp has happened after a long period of 20 years, still these changes are welcomed by market participants. The quantum of the benefits available to the public investors cannot be quantifies as of now, however this gives confidence to the investor fraternity that the SEBI is positively working towards protecting the public interest from insider trading. Further, on the economic data front, the consumer price inflation and wholesale price inflation came below, raising hope of rate cut from RBI.

On global front, the major global indices showed good strength over last 15 days. The economic data from the US economy showed signs of growth in its economy, making the benchmark indices to reach new highs. Interestingly despite weakness in the European economies, the European markets showed a rise of three to five per cent in its major indices because of signals of economic stimulus from European Central Bank. The Chinese markets too showed almost three per cent rise, over unexpected interest rate cut by People's Bank of China. The Japanese market too gained over continuing stimulus from its government.

The next 15 days are full of economic events including second quarter GDP data would come before you get this copy. The Indian markets are also eying on the winter session where 67 bills will get the push from the government. Further, the expectation from the RBI to cut the interest rate as psychological pressure has started building on the RBI governor as most of the economic data are signaling comfort to cut the base rates. RBI has its review meeting on 2nd December. We expect these events will determine the direction of the market over next few days.