Bulls Are Back… Brace For Another Good Race!

The turn of the markets reminds me of Duke Ellington. He once said, “Grey skies are just clouds passing over”. This statement seems so pertinent in the light of the turn of events, sentiments and the overall economic scenarios that has happened over the past couple of days. Yesterday, the Sensex shot up by more than 700 points, which stands to be the highest intraday gain for the index in almost four years. The signs of such a smashing beginning to the week were well in sight. After China buoyed up the overall international mood with its better than expected trade data, back home too Initial reports about a good trade had set up the stage for a grand opening.

The turn of events and incoming economic data points, not just on the domestic front, but also globally is all poised to spread big time cheer in the markets. The most important contributions to this change in scenario came from the new RBI Governor, Raghuram Rajan. The steps initiated by him on taking over office have begun to pay off. Reversing the controls placed on companies overseas investments, providing an exchange risk cover for d banks USD deposits, a special window for oil companies who seek dollars and allowing banks to double their overseas borrowing limits has perked up the rupee. From being one of the worst performing currencies, it today stands at being the best performing currency having gained substantial strength over the past couple of days. If it continues to gain the way it has been doing so far, we would certainly be looking at levels of Rs 60 to a dollar soon.

While on one hand where Rajan’s proposals have been working a kind of magic on the markets, on the other, a favourable trade data has provided that much needed extra push to stabilise them. Trade deficit came in at a five month low, thanks to a 13% rise in exports in the month of August. This, coupled with lower imports has really worked well in the past month.  Will it continue? Well, let’s genuinely hope it does.

Meanwhile, globally too there have been some very positive changes, particularly on the geopolitical front. The Syrian escalation threat is finally in its final stages of dying down. Russia’s intervention has been very critical in the whole drama with Syria now agreeing to surrender its chemical weapons stock. Earlier in the day European markets reacted well to positive trade data from China along with expectations of a considerable tempering down of the Syrian crisis. The US markets which began on a good note, gave in some gains after Obama’s reference to keeping open the option of a military strike on Syria if diplomacy fails.

Asian markets are trading mixed today. Taiwan, Korea, Singapore and Hong Kong are in the red with an average decline of a quarter percent. Japan, Malaysia, Indonesia and China continue to trade stronger with benchmark indices rising an average half a percent there.

So, how will the Indian markets follow up yesterdays 3% rise? Well, it looks quite obvious that there is little to spoil the party, at least for now. The stabilisation and strengthening of the rupee seems to be the biggest positive for the markets right now. News flows on other economic data points too have been quite positive and that shall help the markets go up further. Get set for another good day!