Last week was a historic moment for many global markets. The US benchmark indices - Dow Jones Industrial Average and S&P-500, Germany’s DAX and the Philippines stock index have recorded their new peaks while some others in striking distance.
Will domestic benchmarks the NSE Nifty and the BSE Sensex emulate global majors such Dow Jones and S&P in breaking the previous peaks that they had touched during the 2008 boom?
FII flow
To achieve that, according to market insiders, easy liquidity should continue to be available at both domestic and global levels, as fundamentals are taking a back seat. Though till now major countries such as the US, Japan and Euro zones have been adopting an accommodative stance by stimulating their economies through bond buying programmes, the Reserve Bank of India last week had said that there was only a limited room for further easing.
Foreign institutional investors have so far invested Rs 63,640 crore or $11.8 billion in 2013 even as domestic funds were net sellers to the tune of Rs 38,625 crore.
India’s favour
According to Morgan Stanley, “Global liquidity is firmly perched in India’s favour. If the fall in commodity prices is sustained then it creates the spectre of a shift in local savings and a fall in short rates much to the benefit of equities.”
Citi, however, said though sentiment towards India is ‘undoubtedly positive’ due to the drop in commodity prices that does not remove ‘fundamental challenges’.
Recovery in growth, commodity prices remaining at current levels and political uncertainty and risk of an early election could offset the positive impact of lower commodity prices, it added.
Factors to watch
ABB, HDFC, Lupin and Ranbaxy will unveil their results on Wednesday; Asian Paints and Punjab National Bank on Thursday while NTPC will announce its numbers on Friday.
Industrial production data for March will be out on May 10.
The Budget session of Parliament ends on Friday even as key reform bills hang in balance. The Government introduced an amended Food Security Bill in the Lok Sabha on May 2.