The week gone by opened on a volatile note, obviously uncertain as to how far it can push ahead after the Budget-propelled rally had catapulted Nifty nearly 6 per cent in the previous week. As the week progressed, markets were seen to be on a risk-on mode, and though the gains were not as sterling as the previous, the risk appetite seemed to be very much alive, seemingly ignoring negative news. Usually such characteristics are seen when investors are expectant of larger gains in the near term. Thus, though, the week closed with only modest gains, it takes forward lot of positive cues.
Meanwhile, Bank Nifty that had risen nearly 10 per cent in the previous week erased some gains. Close on the heels of IMF financial counsellor mentioning the need to prioritise a clean-up of banks’ balance sheets, Crisil had downgraded its ratings of eight state owned banks, and the changed the outlook on instruments of five other lenders to negative.
However, key Bills connected to energy, real estate and mining sectors were passed in Parliament, assuring investors that the government is back on the reform path. The Aadhaar Bill, which was earlier rejected in 2011 citing security and privacy issues, has been passed in both the Lok Sabha and Rajya Sabha as a money Bill. According to the Finance Minister, the PDS delivery along these lines done on a pilot basis has saved the Centre a sum as high as Rs 15,000 crore.
Meanwhile, oil prices continued to edge higher, and was seen near $40 a barrel, a far cry from the 26 levels seen a just a few weeks ago. However, rising oil failed to mask growth worries as economic data across globe failed to inspire. The European Central Bank on Thursday rolled out a series of easing measures.
The week ended on a positive, but cautious note, duly acknowledging the event risks lined up ahead in the next week, including India’s inflation figures, Japanese and US monetary policy meeting. With ECB also having cut interest rates, it would be a surprise if FOMC decides to follow up with the December rate hike and act to push rates higher again. While European stocks cheered ECB move, the decision to expand its stimulus measures is a further acknowledgment that the ECB is weary of further economic slow down. Usually, the first beneficiary of such stimulus measures, is the equity market, which though could only end up as a bubble, unless the benefits translate to corporate earnings.
Our markets cheering the Union Budget 2016-17’s fiscal prudence is also an acknowledgment that government expenditure needs to time well to reap benefits, and now perhaps may not be the time, with central banks across globe fighting the threat of deflation.
However, the passing of key Bills has raised the expectation of clearing GST and Bankruptcy Code as well and that the resultant ease of doing business could create internal demand. Which is why India continues to remain a bright spot, and also perhaps why FIIs have been net buyers on consecutive days last week.
■ Key Bills connected to Aadhaar, energy, real estate and mining sectors were passed in Parliament, assuring investors that the government is back on the reform path