Indian equities—a lot going in their favour

Saravana Kumar

The Indian equity market is heading into the second-quarter earnings season for 2012-13 with mixed sentiments — positive domestic cues and muted global cues. The euro-zone crisis has continued to cast a shadow on the global equity markets even as the US economy has been staring at the prospect of a fiscal cliff towards the end of this calendar year. There are clear indications of a global growth slowdown as is evident from the moderating Chinese economy and anaemic growth across the developed world.

As a response to the deteriorating global macro scenario, central banks around the world have resorted to coordinated monetary easing in some form. The liquidity so created would be finding its way into risky asset classes including emerging market equities and global commodities and this has kept Brent crude prices buoyant at around $115 levels despite the global slowdown.

Fortunately for us in India, things are far from gloom and doom. While GDP growth has moderated over the last couple of quarters, there have been justifiable reasons for optimism, especially in recent weeks. The Indian government has announced several long-awaited reform measures such as a hike in diesel prices, opening up of foreign direct investment (FDI) in many sectors including multibrand retail and approving divestment in some public sector units. It has also proposed upping the FDI cap from the current 26%

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