Samvat 2072 began on a positive note for stock market on last Thursday with stocks and indices attracting buying interest during the one-hour special Muhurat trading session.
Sentiments during this session also got a boost with the overnight announcement of FDI being hiked in at least 15 sectors.
Though many of the proposed sectors were previously lined up for the hike, the timing of the announcement served as a positive note, especially coming on the heels of the setback faced by the ruling party in the recently concluded Bihar elections.
The election verdict having come on Sunday, Monday’s opening had forced a lower opening by as much as 2% in indices, but value buying quickly arrested further falls. Tuesday’s trades lacked vigour, possibly influenced by the two-day holiday ahead.
Markets, however, opened on the backfoot on Friday, as indices were dragged to the lowest since late September following economic data that showed industrial production grew at a slower pace than expected.
CPI also showed a minor uptick, but with RBI having front loaded a 50bps cut in September, few expect an RBI action soon, and to this end, investors, at least for now, are less likely to respond as closely as they did before September, when the RBI last moved rates, and when expectations were higher.
Samvat 2071 (2014-2015) had obviously been a bit disappointing to index-based investors, the first time it had done since 2100-2011.
However, the performance during last Samvat year when Sensex fell 4.1%, needs to be pitted against the year it just followed, when Sensex rose a whopping 26.4%. In fact, during the 2014-2015 period, bank rates have fallen, real estate has struggled, while gold as well as other commodities continued to drift, suggesting that equities have held its ground on comparative basis.
The recent election set back has seemingly sprouted a lot of questions to the ruling party, primarily, its ability to continue with the reforms, and pass key Bills in the Rajya Sabha.
Obviously, a favourable Bihar verdict may have given a psychological edge to the government’s persuasion, but the numbers may not have significantly altered its current position. We feel that this is inherent to the democratic process, but will follow the Winter Session that begins on November 26, now that the Opposition may feel more united.
The government has already fired the first salvo with the FDI announcements, thus stating that it is firmly on the reforms path.