Retail Investors May Join The Party Now

“Veni Vidi Vici”- He Came – He Saw – He Conquered. This is the only way one can easily explain the way Narendra Modi helped the BJP to get more than they had even dreamed for. It was a complete wash out of the Indian Congress which got less than 50 seats and cannot even seat in the opposition as even a required number there is 55. With more than 335 seats NDA has got more than what they had expected. The best part is BJP on its own (With pout allies) got 284 seats- means almost 12 seats more than the required majority.

So, now as the Air is clear on who will form the Government, the next on the agenda is what would be the next step by BJP with many challenges in front of them. If we take a look at the challenges ahead, first and the foremost would be the presentation of Budget with higher fiscal deficit. The preceding government was criticized for its vote on account as it had postponed expenses to the tune of USD 16 billion to next year. This helped then with certain relaxation on fiscal Deficit Front. However it will be a difficult task for the BJP Government to contain it under specified limit. Further the tax collection has declined and is unlikely to pick up pace soon. That would happen as the growth starts picking up and corporate post good earnings.

Apart from that the government has another herculean task ahead of it that is of managing or rather synchronizing with RBI. Bringing down inflation is the prime focal point of RBI and it feels that interest rates are a best tool to handle it. Hence, one can expect hawkish stance from RBI on rates front.  And as the Cycle goes, the higher interest would affect the capex and ultimately the GDP growth. Further there is possibility of Government borrowing more, eve that would result in higher interest rates. Worst part is with El Nino playing a part this time, the food prices are likely to remain higher. Hence this is another task ahead of the Government. Other challenges are containing CAD and starting the private investment.

The impact of these challenges     was clearly seen on results day as markets witnessed a profit booking at days high levels.  While the Sensex was up by more than 1000 points it ended the day at 24122 (216 points) Nifty closed above 7200 levels. Now we feel there would be a lot of consolidation happening in the Indian markets and then it would be ready for a next big leap.

As for the US markets, on Friday the Dow closed at 16491 (Up 44 points) and S& P 500 closed at 1877 (Up 7 points). Since few weeks the Indian markets were completely ignoring the global markets. However as the major event of election is over, Global markets would surely make an impact. Hence there is need to track the global markets closely now.

Asian markets are showing mixed pictures with Nikkei witnessing marginal up move of 0.08%. But the Straits Times is down and even Hang Seng is trading in red with half a percentage point decline. Shanghai Composite is also trading in red.

SGX Nifty is however trading in green with gains of 79 points to trade at 7320. We feel, led by the FII inflows and even participation of retail investors would help the markets to open in green. Hence, markets are likely to open on a positive note and carry the momentum through the trading session.