1. Will stock markets rally continue? 3 factors that may help

Will stock markets rally continue? 3 factors that may help

Strong global markets led by declining crude oil prices and soft approach on US Fed rate hikes helped Indian markets move up.

By: | Published: April 10, 2017 12:09 PM
The recent spurt in Indian stock markets is fueled by strong FII buying since BJP’s victory in UP state elections. (Reuters)

Domestic stock markets have been on an upswing ever since the beginning of the year on the back of global and domestic factors. Last week, Sensex and Nifty recorded their second straight weekly gain by rising 86.11 points, or 0.29 per cent, and 24.55 points, or 0.26 per cent, respectively. Strong global markets led by declining crude oil prices and soft approach on US Fed rate hikes helped Indian markets move up. On the domestic front, results of assembly election in 5 states helped move market sentiments in a positive direction along with the passing of GST Bill in both Rajya Sabha and Lok Sabha.

According to Stewart and Mackertich report, FIIs net investment combining equity and debt together were Rs 38,445 crores. It further added that Indian Rupee appreciated sharply by 3.47 per cent against US Dollar in March 2017 following strong foreign inflows in the country which was a result of improving macro economic indicators and strong FII appetite for the Indian primary and secondary markets.

After a strong month of March, what needs to be seen now if the rally would continue going forward. What will drive the markets going forward would be Q4 FY17 earnings, macroeconomic data, trend in global markets and monsoon that has an impact on the rural economy.

If predictions are to be believed, the country is bracing for a weak monsoon. Skymet last month predicted a below normal monsoon this year and possible deficient rainfall for western India as a result of El Nino impact. Government-run India Meteorological Department (IMD) will come out with its monsoon forecast this month.

With the help of Stewart and Mackertich, we take a look at three factors that could drive the markets going forward:

1. The GST bill was passed in Lok Sabha on March 29, 2017. Rajya Sabha gave its approval on April 6, 2017 that indicates July 1st implementation a reality. It is expected to add 2 per cent to GDP and can be the next trigger for Indian market fundamentals, though in short term it can hurt earnings.

2. The euphoria in the domestic market is evident after BJP’s thumping victory in UP assembly election which has led to investors betting on more and bolder reforms and stronger prospects in Indian market. Investors expect the same BJP-led government to be back in power during the next general election, which make them rely more on reforms promised.

3. FIIs were the net sellers during the start of 2017. However, they have started recapitalisation as during March 2017, FIIs were net buyers pumping in Rs 26473.17 crores.

With input from agencies

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