Last week, the BSE Sensex crossed 21,000 points for the first time in three years to touch 21,039.42 on Thursday. The last time it had done so was on November 8, 2010, when it reached 21,075.71. The all-time high the Sensex ever hit was on January 10, 2008, when it scaled 21,206.77 points.
Though the Sensex was unable to remain above 21,000 by the time trading week ended, it held firm ground at a higher level than before. It closed on Friday at 20,682.52 points, a gain of 1,363 points from its position at 19,320.73 at end-September.
The rise in the Sensex is the result of sustained foreign institutional investors (FIIs) flows. The US government's shutdown raised concerns that US economy would take more time than expected earlier to get back on track, which would mean a further postponement of the 'tapering' of quantitative easing by the US Federal Reserve that emerging markets fear.
Thus, the shutdown saw money, moving into emerging markets like India, especially through exchange traded funds (ETFs). For the past one month, FIIs have invested close to $2 billion into Indian equities. Currently, the US Fed is pumping $85 billion every month into the US economy. Since the crisis, the US Fed has pumped in over $3.5 trillion into the US economy.
In the coming week, the market will remain volatile ahead of the monthly future and option expiry. The derivative contracts of October 2013 expire on Thursday, October 31. The nature of the last lot of September-ended quarterly corporate results will also have their impact. These are not expected to throw up any positive surprises.
A third factor will be the latest review of monetary policy to be announced on Tuesday, October 29. If the Reserve Bank of India (RBI) keeps rates unchanged, it will come as a sweet surprise to the market. Given that inflation is still at a worrying level, the market expects RBI to hike repo rates by 25 basis points. If it does not, it will certainly impact the markets positively.
Rising inflation, especially food inflation has tied the RBI's hands. Though it may want to lower rates to give a fillip to economic activity, it cannot afford to do so. The Indian market does not mirror the current dismal state of economy. It is moving purely on money flow, which, as noted earlier, seems likely to continue till the tapering off by the US comes into effect. The US Federal Open Market Committee (FOMC) will hold a two-day policy meeting on October 29-30. Decisions taken there will also affect Indian markets.
Structurally, the Indian economy is on a weak footing, but the market's movement will be speculative, depending more on external and domestic factors than economic fundamentals. After the assembly elections in November-December, the big question will be who will form the next government at the Centre after the general elections next May. Speculation is bound to gather steam. Until the general elections volatility will grip the Indian market.
Source - Business Today
TEAM RYR&CO.
Though the Sensex was unable to remain above 21,000 by the time trading week ended, it held firm ground at a higher level than before. It closed on Friday at 20,682.52 points, a gain of 1,363 points from its position at 19,320.73 at end-September.
The rise in the Sensex is the result of sustained foreign institutional investors (FIIs) flows. The US government's shutdown raised concerns that US economy would take more time than expected earlier to get back on track, which would mean a further postponement of the 'tapering' of quantitative easing by the US Federal Reserve that emerging markets fear.
Thus, the shutdown saw money, moving into emerging markets like India, especially through exchange traded funds (ETFs). For the past one month, FIIs have invested close to $2 billion into Indian equities. Currently, the US Fed is pumping $85 billion every month into the US economy. Since the crisis, the US Fed has pumped in over $3.5 trillion into the US economy.
In the coming week, the market will remain volatile ahead of the monthly future and option expiry. The derivative contracts of October 2013 expire on Thursday, October 31. The nature of the last lot of September-ended quarterly corporate results will also have their impact. These are not expected to throw up any positive surprises.
A third factor will be the latest review of monetary policy to be announced on Tuesday, October 29. If the Reserve Bank of India (RBI) keeps rates unchanged, it will come as a sweet surprise to the market. Given that inflation is still at a worrying level, the market expects RBI to hike repo rates by 25 basis points. If it does not, it will certainly impact the markets positively.
Rising inflation, especially food inflation has tied the RBI's hands. Though it may want to lower rates to give a fillip to economic activity, it cannot afford to do so. The Indian market does not mirror the current dismal state of economy. It is moving purely on money flow, which, as noted earlier, seems likely to continue till the tapering off by the US comes into effect. The US Federal Open Market Committee (FOMC) will hold a two-day policy meeting on October 29-30. Decisions taken there will also affect Indian markets.
Structurally, the Indian economy is on a weak footing, but the market's movement will be speculative, depending more on external and domestic factors than economic fundamentals. After the assembly elections in November-December, the big question will be who will form the next government at the Centre after the general elections next May. Speculation is bound to gather steam. Until the general elections volatility will grip the Indian market.
Source - Business Today
TEAM RYR&CO.
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