The strong positive bias which the Indian markets are currently trading with is not likely to subside at least till the time the new Prime Minister is sworn in and the new cabinet is announced. Speculative spurts on expected policy decisions will be the norm on which markets will seek direction at least until the end of his week. The time to take selective bets on the market has begun. But retail investors need to be careful at this stage. Every correction should be used as the right opportunity to buy into good counters even if it means buying in smaller quantities. Buy for the long term and avoid getting trapped in the speculative spiral if you are new investor or are trying to reenter the market after a long time. For now all seems to be well with India.
The absolute majority with which the BJP has come to power has completely changed the character of the market. Benchmark indices are slowly and steadily moving up. The new normal levels for the benchmarks are probably being reset. From the looks of it, a band of 22000 – 25000 for the Sensex seems more acceptable now than it was just a few days ago. Every market analyst including the big names of the market is pegging the Sensex at a mighty 28000 or above levels until year end.
The developments over the past few days have suddenly provided an added gush of confidence to an already euphoric market which was hoping for a strong and stable government at the Centre. Now that the mandate is so overwhelmingly strong, everyone seems to betting on the brighter days to come ahead. The most important factor that had kept the sentiment on the lower side, particularly over the past year and a half was the lack of confidence that businesses had in governance. The term policy paralysis will now vanish into oblivion as fast as it had come into existence and will not be seen at least for the next five years. This is reason enough for the markets to keep galloping up.
The most significant aspect of the developments that have happened post a strong BJP win is that the pro-business chant characterizing Modi will get louder. Narendra Modi as the Prime Minister of India is expected to replicate his success at the state level on the National level too. Now, this is surely possible provided the man is given a free hand at what he is doing. The very first point to keep in mind for the new government under him and the BJP rank and file as well will be to keep all non-economic outbursts which are unwarranted at this stage at bay. The entire focus, at least in the short term, needs to be on an economic development agenda. The vote is primarily to focus on that and then everything else.
Reports are already pegging the growth of Indian GDP at higher levels. But economists are reportedly shying away from revising their targets for the immediate year and instead have put up an optimistic estimate for the next financial year. That should not be a surprise at all. The new government has just assumed power and it will obviously be some time before their policies and their execution yields the desired results. There are a host of challenges that will have to be overcome in order to mover forward in a more meaningful manner.
Nevertheless, even as all if’s and but’s get discussed, the markets are on their way to the top. This is not in the least to suggest that you will not see those usual bouts of profit bookings. Every step of rise will certainly meet with its fair share of profit booking as sensible investors’ would want to take some money off the table.
For now, global cues are coming out mixed over the past couple of days. Chinese growth worries have been haunting global markets. This coupled with geopolitical tensions in Vietnam and Ukraine has been keeping stock markets abroad on their toes. In the US benchmarks ended the day on a positive note but on thin volumes. The Dow was up 0.12% while the S&P 500 rose 0.38%. The Nasdaq rose 0.86% yesterday. Europe too was trading on the lower side, following Chinese growth concerns and awaiting their own policy statements from central bankers.
Asia has opened mixed this morning with Japan, China and Singapore trading well in the green. Hong Kong and Taiwan too are following their East Asian counterparts but Indonesia, Malaysia and Korea are on the losing side today. Benchmarks in these countries are down an average half percent. These would mean nothing for the Indian markets which are kind of celebrating the new government formation at the centre.
The strong positive bias which the Indian markets are currently trading with is not likely to subside at least till the time the new Prime Minister is sworn in and the new cabinet is announced. Speculative spurts on expected policy decisions will be the norm on which markets will seek direction at least until the end of his week. The time to take selective bets on the market has begun. But retail investors need to be careful at this stage. Every correction should be used as the right opportunity to buy into good counters even if it means buying in smaller quantities. Buy for the long term and avoid getting trapped in the speculative spiral if you are new investor or are trying to reenter the market after a long time. For now all seems to be well with India.
