Markets have turned positive recently on easing of liquidity concerns and also due to the appreciation of the Indian rupee from its lows. On the domestic front also, we have seen some reform initiatives being taken by the government in terms of faster project clearances.
However, we still have to see big commitments being made in investments, especially by the private sector. The new RBI Governor Raghuram Rajan provided a positive surprise by keeping rates stable at RBI's latest policy meeting, but further action is dependent on the economic data. Moreover, the unease over potential liquidity withdrawal still persists. We also note that, market valuations are not undemanding at these levels.
We opine that, if the markets have to sustain the current levels and move up, it will need to have more confidence in the medium-to-long term growth rates of Corporate India. Growth rates will move up once there is a more enabling investment climate and a lower-interest rate regime.
Disappointment in earnings or on future outlook may result in corresponding specific corrections.
By Dipen Shah, Head- Private Client Group Research, Kotak Securities
Note: The views expressed are those of the author.