GLOBAL CUEs TO DRIVE THE MARKETS

Over last few weeks the domestic markets have disappointed with weak March 2015 quarter results and saw continuous selling pressure. The market barometer Nifty Index too crossed a psychological level of 8,000; however, the market seems to be taking support at these levels and recovering from its recent low during the last one week. The Nifty seems to be taking support at 7,900 – 8,000 levels the third time since the start of CY15. The recovery in domestic market is supported by the expectation of money flow to India after bubble burst in Chinese economy.

The Indian markets got some respite from the FOMC meeting too. The FOMC statement after its meeting reflects a dovish mood. Further, there may be delay in the interest rate hike if the labour market in the US does not show improvement in the coming quarters. Further, the market bullishness supported by domestic cues over the monsoon concerns easing. Most of the parts of the country have received excess rainfall till date and farmers across these parts of country are stated to be sowing the kharif crop.

Meanwhile, the Shanghai Composite Index dropped by 17 per cent in the last six sessions. Interestingly, the Chinese market capitalization has tripled over the past one year. Even the US index provider MSCI delayed inclusion of Chinese A shares. Earlier, in March 2014, MSCI wanted Chinese A shares to be included but this was cancelled because the country had not taken sufficient steps to facilitate investment in its markets. According to a survey, seven out of 10 global investors feel that the Chinese stock market is showing signs of a bubble. This has increased the expectation of foreign money inflow to the Indian economy as against the Chinese counterpart.

However, the market mood changed last Thursday and fell for the first time over the last nine trading sessions, taking profits out when the Greek creditors rejected certain proposals from Athens on the debt deal. Greek Prime Minister Alexis Tsipras blamed the creditors, saying they either do not want a deal or are serving specific interests. The Greece debt issue remains lingering over world economy. Greece has defaulted and denied to repay its debt to its international creditors due in June 2015.

On the domestic front, the government continues to plan public spending and proposed to spend around Rs 1 lakh crore on the 100 Smart Cities Scheme and 500 cities under the Amrut Scheme. The government further intends to provide about Rs 57,000 crore to public sector banks towards recapitalisation over the next two fiscals to meet Basel III norms and for growth. However, we expect the global market to drive the domestic market mood.