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MARKETS – HAS DONE OR STILL MORE ROOM LEFT

General Market Talks

All the major hurdles - General Elections to the Union Budget - that market participants were waiting to cross over the past six months have now been dealt with. And the way the Indian stock markets have reacted, it's safe to say that the outcomes of all these major events have been favourable.

The key question, as always, remains: what now? Are stocks still investment worthy? Or has the time to take a "cautiously optimistic" approach on markets arrived?

While expectations of India doing well in the future - and thus the companies to reap the benefits from the same (the optimistic part) - are high, there are a bunch of factors across the world (the cautious part) that could prick into this seemingly little optimistic bubble that has propped up in the recent past.

The current mood seems to be mixed, which could easily confuse a naive market participant - the individual investor. Opposing views are flying around now given the very sharp run up in stock prices. Some are of the view that with the run up in stock prices, their valuations have followed suit and thus, story may not be as compelling as before. This is the view of financial behemoth Goldman Sachs. The rationale for the same is that the next leg of the rally will be driven by earnings and reforms rather than sentiments.

As reported by the Economic Times, India's weight in Global Emerging Market (GEM) funds has hit a record high of 10.5% in the month of June this year. During the market peak of 2007, the same stood at 7.5%. While this share has been quite volatile in the years following 2007, the optimism started to build up ever since hopes of the Modi led government coming into power started increasing. And from what it seems, the funds are "overwhelmingly" bullish on Indian stocks even now!

In short, what this means is that there could be more money coming in the direction of non-US markets, including India, which can keep Indian markets a preferred choice of investment.

The various subsidies that India doles out are like an Albatross around its neck. It is actually one of the key reasons why Indian economy has not been able to take the next big leap. And when Jim Yong Kim, the World Bank President came visiting the country recently, he too shared a similar perspective. He is of the view and rightly so that fifty percent of all the subsidies in the country actually end up in the hands of the top 40% earners in India. Consequently, it is not a progressive system at all. It in fact benefits the wealthy more than it benefits the poor. Mr Kim was therefore mighty pleased that the Government is looking to bring the same under control and usher in a fresh round of fiscal consolidation. Mr Kim also sounded very optimistic about India going back to the 6% plus growth rate. He argued that India had lots of natural assets. Therefore if the Government moved quickly towards implementing reforms like the Goods and Services Tax (GST)for example, it can add as much as 1% point to India's growth.

Currencies

The tensions of Russian sanctions are increasing in the region after some measures being taken by EU. The RUB was the worst performing currency for the last 10 days. The same is expected to continue for time being. The market are now waiting for outcome of FED meeting this week. INR may remain on side-lines for the upcoming fortnight in the broad range of 59.80-60.40. but the same is expected to gain momentum in the second fortnight of August when it may test 60.80-61.00 levls.

Currently any major movement is not expected in the near future...

Disclaimer

These deal indications are only advisory in nature and may not be true in 100% cases. Read more....