With the RBI providing some comfort by maintaining a status quo on interest rates and the international scene quite calm this morning, you could see markets open positive and trade above the line today. The SGX Nifty is trading very strong as of now and that should be a good indicator of where the markets are likely to head today. Trade the sentiment and wait for the next big trigger – the FY14 and March quarter results.
The already spellbound markets have another reason to cheer. Dr Rajan’s reading of the economy and his monetary measures have further set the tone for atleast another dose of upside for the markets. After remaining volatile for the initial part, yesterday the markets took off on those measures where interest rates were left unchanged and a more benign growth scenario was built by the RBI.
According to the RBI, Real GDP growth is projected to pick up from a little below 5 per cent in 2013-14 to a range of 5 to 6 per cent in 2014-15 albeit with downside risks to the central estimate of 5.5 per cent. Easing of domestic supply bottlenecks and progress on the implementation of stalled projects already cleared should contribute to growth, as will stronger anticipated export growth as the world economy picks up.
For the year as a whole, the CAD is expected to be about 2.0 per cent of GDP. Sustained inflows, augmented by repayments by public sector oil marketing companies of their foreign currency obligations to the Reserve Bank during March, have led to an increase in reserves.
The above two paragraphs from the press statement issued by Dr Rajan have a lot to say about the days to come. One, your growth, though on the moderate side, will be higher than what we saw during the whole of FY14. Two, CAD which has been the biggest worry is all set to come down to far more comfortable levels going forward. The augmentation of forex reserves is already reflecting in the gains that the Rupee is registering against the dollar. A rupee at a sub 60 level to the dollar means a lot as it reflects on the dollar flow into India.
The debate between who contributes more to the dollar flows, the NRIs who have been repatriating huge chunks of money back home or the FIIs who have been investing heavily into India can go on forever. But right now, FII inflows to the markets have been driving it higher and that calls for measures to ensure that they continue investing in India. These measures too have come in adequate dosage in yesterday’s monetary policy. From allowing them to hedge their currency risks through exchange traded currency futures to simplifying KYC norms, Dr Rajan has ensured that he keeps them in good spirits at least for now.
Now that the last of the triggers, or should we say the first trigger of FY15 has turned out to be quit on the moderate side, the markets will once again look for something more to focus on. Elections do remain the main plank but there are other things that need to be paid attention to. Among them global developments would have to be carefully watched.
Growth in the US is firming up. Indications from data points are revealing this in a more clear manner. Its manufacturing sector was reported to have picked up pace for the second consecutive month in March. The positivity surrounding this helped the Dow rise by 0.46%, the S&P 500 by 0.70% and the Nasdaq by as much as 1.64%. Europe as usual continued to track the US and its own data too has been quite positive. There too the manufacturing sector continues to remain on the path to recovery and needless to say, markets are reacting positively to all this.
Asian markets have opened the day on a positive note. All without exception are trading in the green this morning. Japan is seeing a strong up move with the Nikkei having gone up by more than one and a half per cent as of now. All others including the Chinese benchmark are up an average quarter percent.
With the RBI providing some comfort by maintaining a status quo on the interest rates and the international scene quite calm this morning, you could see markets open positive and trade above the line today. The SGX Nifty is trading very strong as of now and that should be a good indicator of where the markets are likely to head today. Trade the sentiment as of now and wait for the next big trigger – the FY14 and March quarter results.
