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Where are the Indian stock markets headed?

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Category:  Market  
| 14-09-2016 03:32 PM

Indian Stock Markets

The arrival of Ganeshji - the remover of all obstacles appears to have been exceptionally promising for the Indian stock markets. A day after the 10 day long festival started, the sensex kissed the 29,000 mark during intraday trade on 6th September. There were other positive triggers like rebound of expansion witnessed by business in the service sector.

Market breadth showed signs of overall good health with 1,627 shares rising and 1,125 shares declining on 6th September. The midcap index outperformed the sensex while the small cap index lagged behind the sensex. All 19 sectoral indices on the BSE were also in the green.

IT major Infosys shot into limelight riding piggy bank on its new JV SPC, a Saudi Arabia based company for IT services. Infosys will invest 70% in the equity of SPC which is valued at $312,671 while SPC will hold the balance 30%.

The housing finance major HDFC was another notable gainer on the day notching a smart rise of 1.29% consequent to successful closure of the third tranche of bonds denominated in INR to overseas investors, with an aggregate value of 1,000 crores.

Good monsoons

After two years of consecutive failures, monsoon has been fairly active across the nation in 2016. The economy is likely to gain momentum due to more than expected production in the agricultural sector. In September, 2016 vegetable prices have already started falling, though price of pulses moved erratically in the higher levels.

Global triggers

Barring the Fed rate hike by the US, there are no apparent global triggers that can impact the Indian stock markets in the near term.  Nevertheless, events in China must be followed closely to avoid possible tremors originating from there.

Strong economy

Economic performance so far in the current fiscal has been strong and the FM’s hands are further strengthened by lower oil prices. If gold demand also remains subdued during the upcoming festival season, the Finance Minister will get more sleep during the next budget exercise scheduled for February, 2017.  The 7% plus GDP growth we see now must be sustained and improved in the coming days to provide further impetus to the stock markets.

Political stability

As always, political stability is a crucial factor that will determine the course of the markets. Thankfully, there are no immediate worries on this front. However, the assembly elections slated for early 2017 in Uttar Pradesh can be a game changer for the markets as well as the NDA government. If the NDA garners a clear majority in Uttar Pradesh, that will send out strong signals to the markets. But, if the reverse becomes true, some knee jerk reactions cannot be ruled out.

As at the 2nd week of September, 2016, Dalal Street appears to be on course to celebrate one of the best Diwalis in the last 5 years. In the run up to that, some zigzag movements should be expected, largely attributable to profit booking at intervals.

Sunil Patni, CFA
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