MUMBAI: The bears have been trapped; the bulls are back in control said a long-term market analyst looking at the way equities bounced back during the latter part of the last week.
From being battered by the rupee and oil price worries on the first two trading sessions, the macroeconomic data, as well as the news of Prime Minister Narendra Modi convening a meeting to take stock of the economy, pulled the markets up.
For the second consecutive week, the Sensex and Nifty were down despite the recovery in the last two sessions. Will the bulls continue to be enthused after a weekend of subdued action from a much-anticipated meeting?
Friday’s announcements on shoring up the rupee and controlling current account deficit are likely to have a salutary effect on the rupee as well as the equity markets.
Markets are also going to be enthused by the finance minister’s assertion to stick to the fiscal deficit target.
This may perhaps directly impact the oil marketing company stocks that have been dragging on fears of subsidy burden.
This week though Trump would be the wild card. News of the US tariff action on China as early Monday could spook the markets.
“The pain in emerging markets could further rise in case US goes ahead with the planned tariffs and further tightening by Fed and not to forget that China has already threatened to retaliate,” Saurabh Jain of SMC Global Securities wrote in his weekly outlook.
Individually though each one of the five measures announced on Friday would be analysed for its positives and negatives before markets take a plunge. For instance, the relaxation on masala bond issuances and external commercial borrowings could actually be considered negative said Abheek Barua, chief economist at HDFC Bank.
“Increase in short-term ECBs or FII exposure could lead to further worsening of vulnerability ratios and the global investors might actually take this negatively,” he said.
Whether equity markets would only take the positive side of liquidity and rupee strength would be known this week
Positive trend likely
Friday’s notice on shoring up the rupee and controlling current account deficit are likely to have a salutary effect on the rupee as well as the equity markets.