Tuesday, 30 May 2017

Indian Markets on a Roll Amid Improving Sentiments

The euphoria in the Indian equity markets seems to be gaining strength day by day as the equity benchmarks continue to scale new lifetime highs. Buoyed by encouraging corporate earnings and a string of government reforms, including NPA resolution and steel policy, domestic markets are in no mood to look back.

The two prominent Indian market indices, the benchmark 30-share Sensex index and the Nifty 50 index, scaled record highs on 26th May, 2017. Stock benchmarks soared almost 1 per cent to all-time highs with the Sensex closing above 31000 and Nifty touching 9600 for the first time.

Sentiments of investors remained upbeat on a sustained pick-up in the economy and corporate earnings, backed by reforms such as the goods and services tax (GST) and tackling of bad loans. The governing Narendra Modi-led Bharatiya Janata Party (BJP)’s smart victory in the 2017 Uttar Pradesh assembly elections has raised the probability that it could come back to rule at the centre for the second term, further boosting the investors sentiments.

Meanwhile, continuous purchase by domestic institutions has kept the momentum going. Adding to this, the fact that other forms of investments such as property and gold have not provided adequate returns, have also made equities look more attractive in the year 2017.

The Indian markets are also relieved by the timely arrival of the southwest monsoons. Analyst pointed out that FMCG heavyweights such as Hindustan Unilever and ITC got a boost after the India Meteorological Department (IMD) predicted the timely arrival of the southwest monsoon rains.

Positive global cues also played a vital role in the D-street clocking 31-k mark, after the Federal Reserve’s latest meeting showed that the policymakers were cautious about a fresh rate hike. According to the minutes of the May 2-3 meeting, the Fed members decided that they should hold off an interest rate hike until they were confident the recent US economic slowdown was temporary.

Going forward, the outlook for the coming months looks promising and the Indian markets are expected to strengthen further with the indices expected to clock new highs in the current fiscal as the macroeconomic backdrop remains favorable. 

Latin Manharlal Group

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