Sentiment turned bullish once again at the bourses in double speed, as cues from the global markets remained positive. With the US stocks hitting record highs and foreign institutional investments pouring in continuously, bulls gathered steam at Dalal Street too.
This week the markets may kick-off on a positive note, but the big question is will the rally sustain.
On the surface everything looks hunky-dory, but an air of pessimism remains, particularly when it comes to investing.
Except foreign institutions, other investors such as domestic institutional and retail investors are yet to commit big investments. This will happen only when fundamentals change positively. Mutual funds still witness redemption pressure from investors on every rise.
Christopher Wood of CLSA in the latest Greed & Fear newsletter, said: India remains far from a straightforward bull story. Though he was overweight on India, he moderated India’s return potential mainly on two recent disappointing developments – the Budget and the latest GDP data.
The Budget, “while not a disaster” was far from the major endorsement of reforms that investors would have wanted to see, he said in his newsletter. The latest quarterly GDP data, which slowed to 4.5 per cent in December quarter, provided evidence of an intensifying slowdown in India. “This raises a real question mark over Greed & Fear’s previous assumption, namely that the worst of the investment slowdown has been seen. There is certainly no sign as yet of a pick up in private sector investment.”
But Goldman Sachs has a different take on India. “We remain overweight Indian equities on both a 3- and 12-month basis, with a 12-month target of 7.000.” Recent Current Activity Indicatorand Purchasing Managers’ Index suggest growth has troughed, indicating the macro cycle is turning, said Goldman Sachs. “From a relative perspective, India is the third least expensive market in Asia-Pac ex-Japan based on 10-year historical P/E & P/B z-scores.”
This week, market participants will keenly watch industrial production and inflation data as they will provide some clue on the stance that the Reserve Bank of India will adopt in its mid-quarter monetary policy review on March 16.
Another important data are advance tax payment, which will start pouring in from March 15. This will provide cues on the likely March quarter earnings by India Inc.
The ongoing Budget session of Parliament will also be watched by market participants as key Bills for consideration include the Forward Contracts (Regulation) Amendment Bill 2010, the Pension Fund Regulator and Development Authority Bill 2011 and the Land Acquisition Rehabilitation and Resettlement Bill 2011.