Channel: Markets

Tuesday, April 26, 2011
Indian Market: Recovery on the card?
Tables & Graphs

Indian equity market has once again shown its resilience and bounced back smartly.It not only shows the renewed trust of global investors but also signifies the perennial long term growth prospect for Indian Economy. Clearly India cannot be ignored and the belief seems to have been well taken by the global investor community.


Indian bourses have staged a remarkable comeback and the BSE sensex now lies at considerably higher than its value in Feb 2011.In the first month of calendar year itself sensex kept going down gradually and the drivers were more of global phenomena than the local ones. The Egyptian crisis triggered the alarm as India got impacted both on corporate as well as commodity front.The increase in oil price has always proved to be a dampener for India and this crisis was not different in that sense. The oil shot up to more than $ 100 a barrel and the inflation concerns were riding high in India. But it was not end of problems. There were many more on domestic front which just added to this worry in a big way. The governance deficit seems to have paved the way for a monotonic downfall into the markets. To combat the inflation RBI came up with its normal tool of rate hikes and the market reacted to them in the traditional manner and Sensex & Nifty plummeting on Inflation woes. As Indian market looks to be increasingly be sensitive to global markets, the lack of FII inflow was more than enough to pull the market down.


Despite the shoddy performance, it was clear that market will not remain subdued for very long as India offers strong fundamentals for growth. The market bounced back in March and recovery is very well on the card and it is very much evident from the Sensex level which improved more than 10% from its Feblevel in April. The noteworthy point is the net negative FII inflow in Feb clearly impacting the BSE index. The Inflow in both Jan and Feb 2011 were negative but situation turned when inflow registered a positive turnaround in March.With the impact so clearly visible any talk of decoupling for Indian market no longer remain valid.


While the market has shown volatility in the past few months,there is hardly any doubt on its potential.Though many experts have talked about market being range bound in 2011; the moderate returns are always for investor community. So for investor community even if India does not remain the no 1 of preference, it would always be in the Radar.This is also bolstered by the fact that Indian government now looks very much unfazed with the problem of plenty unlike past.So any regulatory intervention is a very distant proposition. Moreover, with the Lokpal bill committee in place and government looking in damage control mode to fight the corruption, governance is only likely to improve from here on.


With the Indian companies aspiring to raise as much fund as they can, there is hardly anything that can stop them from doing it.With income growing and sustainable high saving rate corporate India should be able to channelize the household saving to run the business.As IDR is becoming popular there is no denial that foreign companies would also join the brandwagon in a big way very soon.So despite the gloomy outlooks Indian market looks all set to shine in the months to come.


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