The Indian capital markets have been witnessing an unprecedented boom riding piggy back on a series of promises made by the new government at the centre. Even sporadic jitters in the global markets have had little or no impact on the Indian markets over the last year or so. On the eve of the budget the nifty climbed to 9.000 but could not retain the momentum for long. Inspite of this, several stock market research experts agree that the Indian courses are on a strong wicket and can scale greater heights to breach the 10,000 mark for Nifty by the third quarter of 2015. Let us now briefly examine some of the key drivers that will help Nifty in this dream journey.
The significant dip in oil prices has come as a big bonus for the Indian economy. The current account deficit now hovers around 2% of GDP and if the trend in oil prices continues over the rest of the calendar year, this figure could further peg down. The fiscal deficit for 2015-2016 has also been reigned in according to expected lines to be around the 4% mark. Add to this revenue generation from dis-investments and other avenues like coal block auctions and the spectrum action, the government will find it easier to implement several measures for economic recovery that have been outlined in the budget document.
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Make in India Program
The Make in India Program is being pursued with great passion by the Prime Minister himself. Though the full impact of the program could consume a couple of years to translate into economic benefits, the program itself is attracting plenty of international attention and some of the projects have already moved from the drawing board to measurable action.
During the first quarter of 2015 fresh investments from FIIs into the Indian capital markets exceeded 72,000 crores and the trend is likely to continue over the rest of the year. Most investors are now confident that the Indian economy is on the right trajectory to record one of its best growth stories in recent times. However, some knee jerk reaction on the back of possible fed rate hike can be expected. Past experience shows that such a reaction would not last longer than a week or two. FIIs are influenced by a host of pull factors that include a recovering economy and a stable government.
Many would opine that an imminent rate hike by the US Fed could trigger strengthening of the dollar and a consequential flight of capital. But, if the recent past is any indication, the Indian capital market today is significantly more resilient to such eventualities with more and more investments pouring in not only from the United States of America, but also a number of other nations. The downward trend in interest rates, a more comfortable inflation will more likely keep the Indian currency insulated from any significant swings.
Thus, the conditions for the Indian stock markets appear to be one of the brightest in several decades. Many of the reform actions promised in the budget and planned by the Prime Minister should now translate into visible action at the ground level to keep the momentum going.