Over the last week, there was some consolidation in the markets after the sharp rally in the wake of the election results. The markets remained quite choppy as well due to the futures and options settlement, and increased institutional activities. During the first few days of the week, the markets cooled off slightly due to profit booking by investors. They rebound from lower levels towards the middle of the week and recovered all their losses as investors started picking up stocks at lower levels.
Analysts believe there is a huge rush among investors to enter the markets at dips and therefore the sharp bounce backs every time the markets correct. The indications from the government of low interest rate loans for industries spurred sentiments in the markets. On the commodity front, the prices of crude oil traded firm above USD 60 per barrel. Gold prices also remained firm in the international markets due to the weakness in the US dollar against major world currencies.
Here are some of the significant developments in the markets last week:
Macroeconomic developments
Although the markets have rallied quite a bit in the last couple of months, analysts are still cautious. The macroeconomic indicators here are still not very positive. Many macroeconomic indicators like the Index of Industrial Production (IIP), GDP growth, agricultural production, bond markets etc are yet to show signs of complete recovery. The monsoon is another factor that dictates our economic conditions up to a certain extent. The Reserve Bank of India (RBI) has taken several steps to infuse liquidity into the economy to stimulate it in the recent past. It will be required to continue these efforts in the medium term before taking any steps to tighten the monetary policy.
Budget expectations
The market expectations of the budget to be announced by the newlyelected government are mounting. The finance minister, in his recent speeches, indicated that the budget will be announced in the beginning of July. It will be interesting to see how he strikes a balance between the measures to sustain and stimulate GDP growth, and the measures to contain the fiscal deficit. Analysts believe the finance minister will give higher priority to the growth measures and chalk out a plan to gradually reduce the fiscal deficit over the next five years. The reforms at the top of the list include freedom to oil marketing companies to set the fuel prices as per international markets, reforms in insurance and pension sectors, and divestment in some public sector companies.
FII investments
The confidence of global investors is coming back. Many global rating agencies have upgraded the investment ratings and recommended India as an investment destination. The foreign money has started flowing in again - both in the form of foreign direct investments (FDI) as well as through foreign institutional investors (FIIs). Analysts believe the new government will take measures to ease policies and pave the way for foreign investors to invest in the domestic markets.
Inflation
The weekly Wholesale Price Index (WPI) based inflation remained at 0.61 percent for the week ended May 15. Although the WPI based inflation is quoting at such low levels, consumers are paying higher prices for day-to-day commodities. This is because the inflation rate based on primary articles is still at quite high levels. Analysts expect the newly-elected government to take appropriate measures to counter the high inflation rate based on primary articles.
Analysts believe there is a huge rush among investors to enter the markets at dips and therefore the sharp bounce backs every time the markets correct. The indications from the government of low interest rate loans for industries spurred sentiments in the markets. On the commodity front, the prices of crude oil traded firm above USD 60 per barrel. Gold prices also remained firm in the international markets due to the weakness in the US dollar against major world currencies.
Here are some of the significant developments in the markets last week:
Macroeconomic developments
Although the markets have rallied quite a bit in the last couple of months, analysts are still cautious. The macroeconomic indicators here are still not very positive. Many macroeconomic indicators like the Index of Industrial Production (IIP), GDP growth, agricultural production, bond markets etc are yet to show signs of complete recovery. The monsoon is another factor that dictates our economic conditions up to a certain extent. The Reserve Bank of India (RBI) has taken several steps to infuse liquidity into the economy to stimulate it in the recent past. It will be required to continue these efforts in the medium term before taking any steps to tighten the monetary policy.
Budget expectations
The market expectations of the budget to be announced by the newlyelected government are mounting. The finance minister, in his recent speeches, indicated that the budget will be announced in the beginning of July. It will be interesting to see how he strikes a balance between the measures to sustain and stimulate GDP growth, and the measures to contain the fiscal deficit. Analysts believe the finance minister will give higher priority to the growth measures and chalk out a plan to gradually reduce the fiscal deficit over the next five years. The reforms at the top of the list include freedom to oil marketing companies to set the fuel prices as per international markets, reforms in insurance and pension sectors, and divestment in some public sector companies.
FII investments
The confidence of global investors is coming back. Many global rating agencies have upgraded the investment ratings and recommended India as an investment destination. The foreign money has started flowing in again - both in the form of foreign direct investments (FDI) as well as through foreign institutional investors (FIIs). Analysts believe the new government will take measures to ease policies and pave the way for foreign investors to invest in the domestic markets.
Inflation
The weekly Wholesale Price Index (WPI) based inflation remained at 0.61 percent for the week ended May 15. Although the WPI based inflation is quoting at such low levels, consumers are paying higher prices for day-to-day commodities. This is because the inflation rate based on primary articles is still at quite high levels. Analysts expect the newly-elected government to take appropriate measures to counter the high inflation rate based on primary articles.
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