Markets High On Policy Run

The Indian markets today opened higher by more than 1% today and are gradually rising higher. Concerns over the rollback of reforms were steered away on the issuance of a press note by the Department of Industrial Policy and Promotion (DIPP) late on Thursday, giving effect to the government’s decision to allow 51 per cent foreign investment in multi-brand retail. This was also supported by media reports which said the Cabinet meeting scheduled for Tuesday, Sept 25, 2012 has reduction of subsidies on public distribution system (PDS) sugar and a hike in FDI in insurance from 26% to 49% on the agenda. This led to investors regaining optimism.

The Sensex is currently trading higher by 272.47 points or by 1.48% at 18621.72 and Nifty higher by 89.30 points or 1.61% at 5643.55.

The Asian markets too have moved higher today after yesterday's massive slump over anti-Japanese protests in China, weak data on the preliminary Chinese manufacturing Purchasing Managers’ Index (PMI) by HSBC and Markit Economics, Japanese trade data indicating a widened trade deficit and weak crude prices leading resource companies to weigh the markets lower. Today’s gains have been led by the technology stocks and a bounce-back in resource stocks. So far, the Hang Seng, Nikkei225 and Shanghai Composite are in gains of 0.76%, 0.57% and 0.55% respectively.

Domestically, stocks are trading higher on all fronts, with midcaps and smallcaps higher by 1.38% and 1.37% respectively. All of the 13 sectoral indices are in the green. The top gainers include Capital Goods, Power, Banking and Metals, up by 2.82%, 2.72%, 2.36% and 2.18% respectively.

BHEL, Crompton Greaves, Praj Industries and Punj Lloyd have each gained over 3%. Mahindra and Mahindra is higher by 3.45% on the back of its new launch Quanto and the plan to export it to Europe and South Africa.

We expect the markets to maintain these highs, with the government putting an end to political uncertainty and fears of a reforms rollback using bold statements and issuing notifications to operationalise the announced policy moves.