Indian Economy Awaits Revival

After the RBI’s last monetary policy review on July 30, a rate hike seemed inevitable as a slew of measures have already been imposed, curtailing liquidity from the market to weed out volatility in rupee valuation against the USD. Perhaps this is the most important quarterly review for the country and not much steps have been taken by the RBI, SEBI and the government in terms of the rupee, which still hovers around 59-60 per USD. The significance of this review can be gauged from the fact that it would decide the direction of the RBI and the government in the forthcoming months with respect to growth, containing the INR and inflation.

The last fortnight was a clear reflection of these concerns and expectations of the market forces from the monetary review. In fact, the current rally at the bourses seems tricky considering the overall situation.

The Sensex opened sober on July 11 at 19468 points and with some flamboyant numbers displayed Large-Caps like RIL, TCS and Infosys, it zoomed to the level of 20351 points on July 23 before closing at 20090 points on July 24, thus gaining a handsome 882 points during the fortnight. Similarly, the Nifty opened at 5894 points on July 11 but dropped to 5887 points during intraday trade. It then gained momentum and touched the highest level of the fortnight at 6093 points on July 23 before closing at 5990 on July 24, gaining 205 points.

As far as the international markets are concerned, the US Dow showed some strength with a 1.76 per cent rise. It was followed by other global indices heading northwards. The biggest gainer was Brazil’s Bovespa with a 7.31 per cent rise followed by Japan’s Nikkei, Hong Kong’s Hang Seng, South Korea’s Seoul Composite and Germany’s Dax which rose by 3.53 per cent, 3.48 per cent, 3.47 per cent and 1.85 per cent respectively. The only loser for the fortnight was China’s Shanghai Composite with a 1.96 per cent decline owing to a dismal manufacturing data.

The FIIs, during the fortnight, made some decisive exit from equities for the Sfirst time and made a net sale of Rs 1211 crore till July 22. In sync with FIIs, Indian Mutual Funds also offloaded their booty with sales worth Rs 354 crore till July 19. As far as the combined turnover of the BSE and NSE is concerned, it stood between Rs 10437 crore and Rs 15840 crore, showing robust activity.

Of the total listed indices, 936 shares appreciated and 1258 shares fell. A total of 41 scrips remained unchanged. HUL was the biggest gainer with a 19.63 per cent rise rise, followed by Aditya Birla Nuvo, Infosys, MRF and TCS with a rise of 15.63 per cent, 14.80 per cent, 14.05 per cent and 12.14 per cent respectively. On the other hand, Gitanjali Gems was the biggest loser with a 33.53 per cent decline, followed by Ashok Leyland, Financial Technologies, TTK Prestige and MMTC with a decline of 19.72 per cent, 17.02 per cent, 14.88 per cent and 14.21 per cent respectively.

This phase of the markets can be a curtain raiser for the next phase and the economy’s future picture considering we are inching closer to the General Election 2014. Not much can be expected from the government on the policy front, though it is pushing hard for reforms in the monsoon session. It is now over to Subbarao who is set to retire this September. The Indian economy and India Inc. are looking at the RBI for further directions.