7th Pay Commission hike, monsoon & economic recovery: Raghuram Rajan is passé; these factors will drive Sensex & Nifty

By: | Updated: June 22, 2016 3:35 PM

7th Pay Commission, monsoon, Brexit vote and US Federal Reserve's interest rate course are some of the key factors that markets will watch out for, feel experts.

7th pay commission, 7th pay commission hike, 7th pay commission news, sensex7th Pay Commission hike, monsoon: Raghuram Rajan?s exit news jitters are passe? and markets are now focusing on global and domestic indicators for the next triggers, say analysts. (PTI Photo)

Raghuram Rajan’s exit news jitters are passé and markets are now focusing on global and domestic indicators for the next triggers, say analysts. Raghuram Rajan had on Saturday announced his intention not to take up a second term as RBI governor. While most analysts and market experts had predicted a knee-jerk reaction on Monday, they felt that domestic fundamentals would ensure that the lure of the ‘India story’ remains intact.

Incidentally, Sensex closed almost 250 points up on June 20, the first trading day since Rajan’s exit announcement. Sensex and Nifty opened the day in red on RBI Governor Raghuram Rajan’s no to a second term, but soon recouped their losses. Sentiments also got boost after government relaxed FDI norms in defence, aviation and pharmaceutical sectors.

So if not Rajan, what will likely impact Indian markets, Sensex and Nifty, in the coming days and months? Monsoon, 7th Pay Commission, Brexit vote and US Federal Reserve’s interest rate course are some of the key factors that markets will watch out for, feel experts.

Says Sahil Kapoor, Chief Market Strategist at Edelweiss Securities, “Markets will be driven majorly by domestic factors. Monsoon is likely to be good and that will be pe positive trigger, especially to spur rural consumption in the economy. So, markets will keep a keen watch on how monsoon pans out.” “Another factor that will play an important role in driving consumption-led growth in the economy, and hence spur markets in terms of better economic prospects will be the 7th Pay Commission hike. This will drive consumption in a big way in the economy,” Kapoor tells FE Online.

Nitasha Shankar, Senior Vice President – Research, YES Securities also gives greater weightage to domestic factors compared to global. “Markets will focus on the geo-spatial distribution of monsoon, that will be one important thing to watch out for.” “Apart from that signs of recovery in the economy will be of importance. While infrastructure bottlenecks seem to have eased and project clearances have been fast-tracked, the on ground pick up has undershot expectations. Markets would want to be assured on the economic indicator front,” she tells FE Online.

Globally, Britain’s referendum vote on whether to exit the European Union, also known as Brexit vote, will be an immediate concern for the market. “If Britain decides to remain in the EU, the Brexit vote will be a non-event. If however, Britain does exit, markets will see a knee-jerk reaction. But, the domestic fundamentals are strong enough to enable stock market recovery,” Nitasha Shankar says. Additionally, Shankar sees US Federal Reserve’s direction on interest rates and China’s economic growth being important indicators that will drive the markets.

Agrees Kapoor of Edelweiss Securities, “Markets will keep an eye on US Federal Reserve’s course on interest rates and US elections. Brexit is another thing, but I don’t see Britain exiting EU. Even if it does happen, markets will see some immediate reaction, digest the news and move on.” “Ultimately India’s domestic indicators are of paramount importance and will ultimately be the ones that will decide markets’ long-term course,” he concludes.

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