Global Stimuli To Help India

During the last couple of weeks, the domestic markets were searching for trigger for the next up move. The market seems to be experiencing volatile sessions during the week. This was also due to derivative expiry last week. The Indian equity market barometer BSE Sensex was up by 0.11 per cent and in contrast NSE Nifty was down by 0.10 per cent during fortnight. Interestingly, the Indian midcap companies were showing some buying interest and the BSE Midcap index was up by 0.28 per cent during last week. After the rate cut move, the foreign institutional investors (FIIs) turned bullish and started buying equity in India markets. The FIIs were keeping good faith in domestic markets and were net buyer of Rs 3912 crore worth of Indian equity in last couple of weeks.

On European market front, the European Central Bank (ECB) had meeting last week for reviewing its monitory policy. The ECB continued with its policy rates. Further, the ECB signalled that it may consider lowering the deposit rates as well as expanding quantitative easing in its December meeting. The shift in the ECB stance sent global equities into a positive sentiment. Interestingly, the latest ECB Bank lending survey highlighted a gradual improvement in Eurozone credit demand despite the rising global headwinds. The latest results also highlighted significant improvement in credit demand in Italy and Spain, additional evidence that the periphery is beginning to drive economic momentum in the Eurozone.

US stocks followed global stocks higher this week after ECB President Mario Draghi signalled that the bank is ready to increase its quantitative easing program, possibly as soon as December. A further loosening of monetary policy in China added to the further gains. The Bank of China announced a 25 basis point cut in lending rate and a 50 basis point cut in the required reserve ratio. Further, the earnings season got into full swing in last couple of weeks. Strong results from Microsoft, Amazon, and Google sparked a rally in the technology sector. Till date earnings per share are coming in better than expected, while sales have missed estimates.

The problem for crude oil seems to be not getting solved. The crude oil came under pressure again in last week after Iran’s oil minister expressed his country’s will to boost production by 500000 barrels per day in coming few months. Further, the Chinese economy reported the economic growth of 6.9 per cent, slowest since 2009, signalling further low demand for crude.

Further, the lower commodity prices will definitely lower the raw material and fuel & energy costs for the Indian corporate improving their profitability in days ahead. Though there would not be any great surprises during the September quarter result, the December quarter can be turning point for the corporate. Further, the stimuli across Eurozone, China and Japan coupled with no possibility of US Fed rate hike are hugely positives for India. Hence rather than wasting time, investors should start investing in fundamentally strong portfolio.