The New Financial Year Kicks Off Amid Much Economic, Socio-Political Activities

While you read this piece of market analysis, Reserve Bank of India would have come out with its quarterly review and there are all the chances of the apex bank slashing repo rate as per expectations of the markets, investors. The RBI review report will kickstart the new financial year, a crucial year for the markets and also the ruling NDA government. The beginning of the financial year 2016-17 will also mark the release of profit and loss data of the companies listed with the country’s bourses. They will be releasing their crucial annual profit and loss account along with their fourth quarter data.

During last fortnight, the Indian markets witnessed bullish trend. The Sensex and Nifty 50 reported increase by 2.66 per cent and 3.15 per cent respectively. From the sectoral point of view, auto, realty, metal and IT indices witnessed rise of about 5 per cent in last fifteen days. The Bankex too rose by 4.46 per cent over the past fortnight. Considering institutional investment, foreign institutional investors (FIIs) remained net buyer in equity markets after Indian equity markets witnessed bottom out in end of February month.                  

There are many research houses predicting about rate cut of about 25 to 50 basis points. During the union budget speech, union finance minister Arun Jaitley set target for current fiscal year is 3.9 per cent of GDP. The government already set fiscal deficit target of 3.5 per cent of GDP for financial year 2017.

The government already reset interest rates payable on small savings and declared that 0.4 per cent to 1.3 per cent reduction across all scheme for first quarter of the upcoming financial year. There will be headroom for more interest rate cuts from RBI in the coming time. RBI is likely to approach policy easing with caution and go for a measured cut in the first monetary policy for the new fiscal year. On earlier policy meet i.e. on February 2, RBI governor Raghuram Rajan left the key interest rate unchanged forecasting inflation risks and growth concerns. Therefore, the governor’s monetary policy will act as key driver for Indian equity markets in forthcoming time period.

Crude oil price is still hovering at low level at about USD 38 per barrel. Meanwhile, there is swelling supply glut which is ensuring crude oil prices at low levels. The supply from Kuwait and Saudi Arabia are not in position to cut their oil output. Decision has been taken by Kuwait and Saudi Arabia to resume oil production at the jointly operated three lakh barrel per day oil fields at Khafji comes at a time when production is supposed to be frozen.

During the mid of March, US Federal Reserve kept interest rate steady. The Fed decision is all about status quo as global crude oil scenario and Chinese economy slowdown. On March 29, Janet Yellen, US Fed Chairperson remarked that there will be no rate increase in upcoming Fed meeting. The US markets too witnessed upwards movement during the last fortnight. The Dow Jones index, S&P 500 increased by 2.21 per cent and 2.49 per cent respectively. Meanwhile, European markets remained cautious. DAX and CAC 40 decreased by 0.46 per cent and 2.37 per cent respectively.

The month of April will also kickoff a political fever. From April 4, the first phase of state elections will take place in the states of Assam and West Bengal followed by Tamilnadu, Kerala and Pondicherry. These five state collectively make up about 51 seats out of 255 seats in RajyaSabha. Outcome of these polls will also play a crucial role in the NDA government attempts to table and pass vital Bills in Parliament.