Market may see relief rally on talk of reforms

It will not be surprising if the last week's relief rally continues this week too. Operators, according to market intelligence, are preparing to bet on the “return of reforms”.

Reforms had dropped out of the market lexicon amid the din of “great global recession”. Politically inconvenient, the reforms were also forgotten by the ruling elite. But one can hear not-too-distant noises now.

The market talk is that in the monsoon session of Parliament, the Government would test the waters; try to push through a couple of “soft” policy moves in areas such as retail. This week, thus, may lend a positive bias.

Evidently, in this structurally bear market there is hardly any presence of a textbook bear. Out of habit, the market observers and writers keep on referring to “bulls” and “bears” – they have lost relevance in the cross-border market context. The present broad neutrality of sort may not resist creation of a short-lived momentum. But the operators' ploy for distribution is another ballgame, and is unlikely to work out in the short term. The chances of making real money also seem remote.

The reasons are not unclear. Retail segment stubbornly remains coy; institutional investors also appear cold. Only some of the high net-worth individuals and proprietary traders are slogging it out.

Apprehensions of a less-than-average rainfall this monsoon are, however, lurking in their minds. The exercise in pricing in the extent of negative surprises that might hit the market from the Q1 corporate results is not complete yet.

Analysts, who are readying the quarterly results previews, give an impression that they are preparing for the worst. The preceding quarter witnessed rather unaffected top line growth. Realisation is dawning now that in Q1 India Inc's top line growth could have been negative. The consensus is that the bottom line remained in the red zone.

Last year, the weather god presumably heard prayers of the Finance Minister in his Budget speech – over 5 per cent growth in agriculture saw the economy through a hard time. This year, the prayers were not repeated though.

Analysts said that this fiscal agricultural growth may not be more than 2 per cent.

The institutional players are of the view that the lost charm of the “India story” may have been replaced by fabled “ungovernable and unattractive” market in the past few months. Another image changeover will require time; some hard work.

According to observers, to breakout of the bear cycle, the market needs strong positive signals from the economy and corporate sectors. But the slowing growth has already signalled a vicious cycle.

FIIs, which once had made Indian equities market among the best performing markets, have now pulled the markets down to among the worst performers. Indian market has matured somewhat in the last couple of decades, but still suffers from many weaknesses.

Some observers are optimistic that a revival of reforms process will also extend to the market in the next two to three quarters. But many still have doubts.

>jayanta_mallick@thehindu.co.in

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