The Hindu Business Line : With crude price, monsoon addding pressure

The country may not be pathetically dependent on the rain god as in yesteryears, but two consecutive rain deficient years may put additional burden on demand and GDP growth.

WOULD the Reliance dispute resolution make Dalal Street forget this week the grim monsoon projection? Dalal Street has so far ignored continuously receding rainline; in the last fortnight weather experts have hiked the rainfall deficits to 59 per cent from 34 per cent in their estimates.

It also took in its stride the rise in crude prices and firm interest rates to rescale its summit.

Rainmaker: Will the Street benchmark climb past the 7000-point mark on the Sensex with deficient rains and venture on a new expedition? Going by the last monsoon's record and economy's resilience, this is not impossible. In the period after the last monsoon, insufficient as it were, growth in industrial and services sectors had made a lot of difference.

The country may not be pathetically dependent on the rain god as in yesteryears, but two consecutive rain deficient years may put additional burden on demand and GDP growth.

It appears that the Street has faith on lesser gods - politicians and promoters. Overall market valuations are still optimistic and the liquidity flow is decent. The overseas funds, which had primarily brought the valuations out of the woods last year, after a pause seems to be re-discovering that in Indian equities are cheaper; and the economy is in good health, which can flourish at higher interest rate regime and the corporate growth profile can remain intact.

Last fortnight's investment figures show that overseas taps are on again. On the other hand, the domestic mutual funds are still on profit-taking mode.

Dalal Street was drenched by season's first drop when Reliance news came in on the week-end. The Street is likely to perform a rain-dance this week on the psychological relief. It may not matter whether the rain stretches beyond the physical borders of greater Mumbai. In the market sentiment, rain should stay mainly on the Mumbai plains.

The developments in Reliance backyard are likely to keep the market busy reading the fine prints of the settlement and their implications. The market already is anticipating separation of infocom business of RIL and listing of the independent outfit in the near future on capital gains issue.

The direct impact of the settlement on share prices of the Reliance group's listed entities may be removal of notional valuation discounts imposed by the market after the sibling rift erupted in public.

Indirectly, the key indices may move up in the short run. The stocks beyond the Sensex and Nifty are likely to get a sentimental boost too.

Valid call: But resolution of serious corporate governance issues thrown up in the last six to eight months will eventually benefit the market. Market players are seem to be divided over the emerging contours of the corporate governance practices set by one of the largest business groups in the country.

The focus is not just on the increasing shareholder's value, but is turning gradually on corporate ethics, in the context of making a long-term valid investment call. That seems to be gain for the market.

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