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

India’s Growth Projected to Bounce Back to 7.2% in FY18

With the fading impact of note ban announced by the Modi government in November last year, Asia’s third biggest economy is expected to gain strength, maintaining its tag of the world's fastest growing economy.

International Monetary Fund (IMF), the international organization headquartered in Washington, has projected that the Indian economy will rebound to 7.2 per cent in this current fiscal year and rise to 7.7 per cent in the next, in 2018-2019.

The hurdles caused by demonetisation resulted into the lack of ready cash available with spenders. However, with the government’s remonetisation exercise, this problem is expected to gradually dissipate in 2017.

Other than remonetisation, a good monsoon season and developments in removal of supply-side problems will also help in balancing this disruption.

According to the report, improving productivity in the agriculture sector, which is the most labour-intensive sector and employs nearly half of Indian workers, remains a key challenge. Farmers require more flexibility in distributing and marketing their crops as this will help improve competitiveness, efficiency, and transparency, it added.

Further, a favourable monsoon could put an end to the almost continuous earnings downgrades that the domestic market has been witnessing in the past several quarters. According to the latest prediction of India Meteorological Department (IMD), the monsoon this year could be normal and bring 100 per cent rainfall instead of 96 per cent as predicted earlier.

Looking at the Asia as a whole, the IMF report estimates that the growth will accelerate to 5.5 per cent this year from 5.3 per cent in last fiscal. However, it warned that the near-term outlook for the region is clouded with significant uncertainty, adding that medium-term growth faced difficulties from a slowdown in productivity growth in both advanced economies and China.

Going forward, on the back of reforms initiatives being taken by the government, India’s growth rate will improve further. Stronger consumption and fiscal reforms are expected to improve business confidence and investment confidence in the country.

Latin Manharlal Group