Strong Global, Local Cues, Chances Of Good Rain May Strengthen Markets Further

Indian equity markets are exaggerating after such a bottom out which was witnessed at the end of February. There are various macro-economic events which have taken place in the last fortnight like economic data release, monsoon forecast from IMD and Reserve Bank of India (RBI) monetary policy.

The Indian equity markets witnessing highs, BSE Sensex and Nifty 50 increased by 1.14 per cent and 1.49 per cent respectively in last fifteen days. On sectoral front, realty, power and auto indices increased by 6.34 per cent, 4.55 per cent and 4.16 per cent respectively. During last fortnight, FIIs bought net equity of Rs 5755 crore and DIIs sold about Rs 3760 crore in Indian equity markets. The strong buying of FIIs shows markets condition is going to improve in future term.

The macro economic data showing a good sign in future. The retail inflation measure consumer price index (CPI) decreased to 4.83 per cent in March against 5.26 per cent for the month of February. The industrial output measure index of industrial production (IIP) increased to 2 per cent. However, during month of January, IIP data stood at 1.5 per cent of contraction. During past three months, the IIP growth contracted but from February it came at 2 per cent. According to International Monetary Fund (IMF), India will remain the fastest growing economy in the world with estimated GDP growth of 7.5 per cent in 2016 and 2017 in its World Economic Outlook India.

Indian Meteorological Department (IMD) has also made a forecast that monsoon for the current year will be above average. The forecast for normal monsoon after consecutive two years’ drought is the trigger for the equity markets right now. The forecast is positive and will give boost to rural demand in future term.

During the last fortnight, Raghuram Rajan declared first bi-monthly monetary policy for the current financial year. The RBI governor eased monetary policy by cutting 25 basis point to 6.5 per cent at its five years’ low. The central bank kept the CRR unchanged at 4 per cent but lowered the minimum daily cash reserve ratio (CRR) requirement to 90 per cent from 95 per cent.

On global crude oil front, Brent crude oil is trading at four-month high of about USD 45 per barrel. The crude oil prices are surging ahead of weekend’s OPEC’s summit in Doha and expectation of a deal to freeze oil production. However, Saudi Arabia is in dilemma for crude oil production cut.

On global front, The Bank of Japan (BOJ) will meet on April 27-28. The BOJ’s policy board will release its quarterly forecasts on prices and the economy, along with a policy decision. On fear of more deflation, the Nikkei declined by 6.87 per cent during last fifteen days. The Dow Jones Industrial Average and S&P 500 rose by 0.5 per cent and 0.33 per cent respectively in last fortnight. The FTSE also rallied by 2.24 per cent, meanwhile DAX and CAC 40 declined by 1.28 per cent and 0.48 per cent.

During the upcoming fortnight, most of the IT companies and private banks’ quarterly and annual results will start pouring in. These two sectors will be watched out for next fifteen days. Investors must feel the rally in Indian equity markets to sustain in future term.