The markets may have been highly volatile in the recent past, but talk about the closing figures and benchmark indices are where they were. It's looks a status quo of sorts.
It's palpable that the market is waiting for a big cue to get a directional move, either upwards or downwards.
Going by what analysts say, India's stock market story is pretty strong in the long run. So, what's the hitch in the short term? Here's what could be holding the bulls:
Current account deficit
No relief from any front, a Reuters poll of five economists predicting the June quarter current account deficit rising to $23-25 billion, or 4.8-5.4% of the GDP, from $18.1 billion, or 3.6 per cent, in the March quarter, couldn't have come at a worse time. Good enough to hold the bulls.
The numbers will be out on Monday.
The soothsayer in Raghuram
RBI's new chief Raghuram Rajan had sent a warning signal three years ahead of the 2008 global financial crisis.
Just days back, he seems to have done it again, saying that there is a danger of bubbles forming around the globe due to easy monetary policy implemented to steer the world back into a more robust growth path.
"We seem to be in a situation where we are doomed to inflate bubbles elsewhere," Rajan said.
"We should wonder whether lower and lower interest rates are in fact part of the problem, I say I don't know."
2014 elections
"Certainly there is a huge risk that as we head towards the elections, at the latest in April next year, the reform agenda could take a back seat and the government goes for populist policies and postpones some of the tough decisions, which could weigh on market sentiment," said Clive McDonnell, Head Equity Strategy, Standard Chartered in an interview with ET Now last week.
Micro calculations
Poor forecast: Religare Institutional Research expects the market to correct 15% from current levels.
"After the recent run, the Sensex is now trading at 12m forward P/E of ~15x, almost at par to its five-year average. With limited macro triggers for the markets in the near term and declining corporate earnings, we expect market valuations to de-rate from current levels," the brokerage said last week.
"We value the market at 12m forward P/E of 12x - at 5-year trough valuations - as we don't see domestic macro conditions improving in the near-term even as global macro picture brightens gradually, with March 2014 target for the Sensex maintained at 17,000 (based on the top-down earnings growth of 10 per cent for FY15), implies ~15% downside from current levels."
Rupee factor
Shardul Kulkarni, senior technical analyst at Angel Broking, says, "we reiterate that the rupeeis likely to test 66 and buying the dollar with a stop loss of 59.9 should turn out to be a profitable trade unless Dr Raghuram Rajan pulls out another rabbit out of his hat."
"All in all we continue to mention that October, as seen historically, may leave a sour taste, after the delicious feast in the September series."
Clive McDonnell, Head Equity Strategy, Standard Chartered, told ET Now: "Previously, we were forecasting a value of 62 for the rupee against the dollar by year-end, but now we have raised that to 69.50. We think that the policy moves by the RBI are credible for both inflationand the currency, but that is at the cost of growth. Growth will be slower than expected."
Inflation and growth
The recent measures by the RBI to curb inflation has dashed hopes of a pick-up in economic growth in the near future. As a result, most foreign brokerages are advising clients to add IT stocks to their portfolio as these companies tend to benefit from depreciating rupee and a pick-up in growth in the US and Europe.
According to Standard Chartered strategy report, the ongoing structural adjustment and the resultant low growth will likely continue despite the deferring of QE by the FOMC and the RBI measures to stem rupee fall.
The brokerage sees downside risks to Sensex earnings and has recommended liquidity driven rallies as an opportunity to realign portfolios towards IT stocks.
Political flip-flop
The country's policy makers are under fire from several quarters over decision-making, that's an old hat, but a strict volte-face?
In what is seen a big flip-flop, though also a positive move, Rahul Gandhi on Friday denounced the controversial ordinance to negate the SC verdict on convicted lawmakers as "complete nonsense", saying, " what our government has done is wrong".
It was a surprise brief appearance at a meet-the-press programme of his party's general secretary Ajay Maken at the Press Club in New Delhi, that he said that the ordinance should be "torn up and thrown away".
"I will tell you what is my opinion on the ordinance. It is complete nonsense, it should be torn up and thrown away. It is my personal opinion," he said.
Long-term play?
Aberdeen Asset Management, a global investment management group which manages assets for both institutional and retail clients from offices around the world, sees India as a better long-term investment destination than China.
Source - The Economics times
TEAM RYR&CO.
It's palpable that the market is waiting for a big cue to get a directional move, either upwards or downwards.
Going by what analysts say, India's stock market story is pretty strong in the long run. So, what's the hitch in the short term? Here's what could be holding the bulls:
Current account deficit
No relief from any front, a Reuters poll of five economists predicting the June quarter current account deficit rising to $23-25 billion, or 4.8-5.4% of the GDP, from $18.1 billion, or 3.6 per cent, in the March quarter, couldn't have come at a worse time. Good enough to hold the bulls.
The numbers will be out on Monday.
The soothsayer in Raghuram
RBI's new chief Raghuram Rajan had sent a warning signal three years ahead of the 2008 global financial crisis.
Just days back, he seems to have done it again, saying that there is a danger of bubbles forming around the globe due to easy monetary policy implemented to steer the world back into a more robust growth path.
"We seem to be in a situation where we are doomed to inflate bubbles elsewhere," Rajan said.
"We should wonder whether lower and lower interest rates are in fact part of the problem, I say I don't know."
2014 elections
"Certainly there is a huge risk that as we head towards the elections, at the latest in April next year, the reform agenda could take a back seat and the government goes for populist policies and postpones some of the tough decisions, which could weigh on market sentiment," said Clive McDonnell, Head Equity Strategy, Standard Chartered in an interview with ET Now last week.
Micro calculations
Poor forecast: Religare Institutional Research expects the market to correct 15% from current levels.
"After the recent run, the Sensex is now trading at 12m forward P/E of ~15x, almost at par to its five-year average. With limited macro triggers for the markets in the near term and declining corporate earnings, we expect market valuations to de-rate from current levels," the brokerage said last week.
"We value the market at 12m forward P/E of 12x - at 5-year trough valuations - as we don't see domestic macro conditions improving in the near-term even as global macro picture brightens gradually, with March 2014 target for the Sensex maintained at 17,000 (based on the top-down earnings growth of 10 per cent for FY15), implies ~15% downside from current levels."
Rupee factor
Shardul Kulkarni, senior technical analyst at Angel Broking, says, "we reiterate that the rupeeis likely to test 66 and buying the dollar with a stop loss of 59.9 should turn out to be a profitable trade unless Dr Raghuram Rajan pulls out another rabbit out of his hat."
"All in all we continue to mention that October, as seen historically, may leave a sour taste, after the delicious feast in the September series."
Clive McDonnell, Head Equity Strategy, Standard Chartered, told ET Now: "Previously, we were forecasting a value of 62 for the rupee against the dollar by year-end, but now we have raised that to 69.50. We think that the policy moves by the RBI are credible for both inflationand the currency, but that is at the cost of growth. Growth will be slower than expected."
Inflation and growth
The recent measures by the RBI to curb inflation has dashed hopes of a pick-up in economic growth in the near future. As a result, most foreign brokerages are advising clients to add IT stocks to their portfolio as these companies tend to benefit from depreciating rupee and a pick-up in growth in the US and Europe.
According to Standard Chartered strategy report, the ongoing structural adjustment and the resultant low growth will likely continue despite the deferring of QE by the FOMC and the RBI measures to stem rupee fall.
The brokerage sees downside risks to Sensex earnings and has recommended liquidity driven rallies as an opportunity to realign portfolios towards IT stocks.
Political flip-flop
The country's policy makers are under fire from several quarters over decision-making, that's an old hat, but a strict volte-face?
In what is seen a big flip-flop, though also a positive move, Rahul Gandhi on Friday denounced the controversial ordinance to negate the SC verdict on convicted lawmakers as "complete nonsense", saying, " what our government has done is wrong".
It was a surprise brief appearance at a meet-the-press programme of his party's general secretary Ajay Maken at the Press Club in New Delhi, that he said that the ordinance should be "torn up and thrown away".
"I will tell you what is my opinion on the ordinance. It is complete nonsense, it should be torn up and thrown away. It is my personal opinion," he said.
Long-term play?
Aberdeen Asset Management, a global investment management group which manages assets for both institutional and retail clients from offices around the world, sees India as a better long-term investment destination than China.
Source - The Economics times
TEAM RYR&CO.
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