Will Sensex, Nifty rally sustain after FM’s economy boost? Key factors that could lift stock market

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Published: August 27, 2019 12:21:02 PM

Even as the headline indices Sensex and Nifty continue to extend gains for the second consecutive day, the confluence of bountiful monsoons, benign global crude oil prices and further monetary easing could help to sustain recovery in stock market.

Economy, weakest quarter, Economy growth, Reuters, passenger vehicle, auto sector, economy news, GDP data, GDP  growth, Nirmala Sitharaman, RBI, EBI surplusThe Sensex spurted 793 points to 37,494 while the Nifty reclaimed the crucial 11,000-mark yesterday after FM Nirmala Sitharaman announced a slew of measures to spur up the economy.

Even as the headline indices Sensex and Nifty continue to extend gains for the second consecutive day, the confluence of bountiful monsoons, benign global crude oil prices and further monetary easing could help to sustain recovery in stock market, according to Prabhudas Lilladher. “The ‘Triveni Sangam’ of bountiful monsoons, benign global crude oil prices & further monetary easing will act as ‘Sanjeevani’ & resuscitate India’s comatose Indian equity markets,” Ajay Bodke CEO & Chief Portfolio Manager, PMS Prabhudas Lilladher said. Notably, The Sensex spurted 793 points to 37,494 while the Nifty reclaimed the crucial 11,000-mark yesterday after FM Nirmala Sitharaman announced a slew of measures to spur up the economy.

Also read: RBI record bonanza for govt: Rs 1.76 lakh crore cash transfer after Bimal Jalan proposals

Robust monsoon

Taking stock of the monsoon situation in India, Ajay Bodke said that India has seen one of best spread (temporally & spatially) of monsoon rains in May and June, after a patchy start in April. These months contrast starkly with the last 4 to 5 years, he noted. “Although agriculture contributes only 18% of India’s GDP, nearly 50% of its population is dependent on agri & allied activities. A bountiful, well spread-out monsoon is likely to lead to a bumper Kharif harvest spurring aggregate demand in rural areas around the upcoming festival season,” he said. 

Low global crude oil prices

Interestingly, global crude oil prices continue to remain low with global growth projections for 2019 and 2020 being progressively toned down by various multilateral agencies like World Bank and IMF, noted Ajay Bodke. After scaling a high of $ 85 per barrel in October 2018, Brent crude prices have plummeted to $58 per barrel essentially reflecting these concerns, observed Bodke. “India imports nearly 85% of its crude oil requirements and every $1 fall in global crude oil prices leads to savings of nearly $ 1 billion in its import bill,” he said.

Continued monetary easing

Even as the RBI’s Monetary Policy Committee (MPC) continues to deliver on its mandate and containing CPI within the 4% target, Prabhudas Lilladher believe that RBI will continue on its path of monetary easing, thanks to benign inflation outlook. Globally Central banks are moving towards lower neutral interest rates which is a rate that neither stimulates nor restrains the economy or a rate at which growth is close to potential & inflation is stable, noted the brokerage firm. “It’s time to ignore the drumbeat of naysayers and buy Indian equities with a medium-term perspective,” said Prabhudas Lilladher.

(Please consult your financial advisor before taking any investment related decision)

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