Markets likely to be subdued
IIP numbers, advance tax payments data may dampen spirits The negative impact of the Union Budget presented...
The negative impact of the Union Budget presented by Finance Minister P Chidambaram last week did not last long. The stock markets that were hit severely before and after the budget recovered on the fourth day after the budget and thereafter continued to gain ground with the last day's gain of 270 points being the biggest one of them all. The positive call on the budget by global rating agency Moody's and Finance Minister's clarifications on foreign investments helped the markets iron out negative vibes by Tuesday. The markets thereafter continued to gain on global cues and the BSE Sensex at the end of the week stood richer by 764 points as compared with the previous week's closing, the biggest weekly jump of the year 2013. Besides, firmness in the Indian currency, an enhanced hope for an interest rate cut by the RBI in itsA semi quarterly policy review scheduled for March 19, news of the major international markets turning up to be stronger ones in the last few days and the most importantly, frantic short-covering by the bear market operators had infused fresh wave of buoyancy into the stock bourses last week.
The Finance Minister came out with a positive clarification pertaining to tax proposals on investments being made by the FIIs which not only did away their fears of being taxed despite tax waiver treaty, but also instilled a fear in the minds of the bear operators that had they held on to their short positions, they would be massacred mercilessly by the bull operators who have regained dominance over the markets. All these factors made the markets go up with all-round buy orders from individual operators as well as the institutional buyers triggered buoyancy in A group securities which immediately percolated to the small-cap and mid-cap segments which too glittered and zoomed up with small to handsome gains. Although the markets have come out of the budget blow, they are unlikely to travel northwards uninterruptedly as more news pertaining to economic and fiscal issues is scheduled to come out in the next couple of weeks.
The IIP numbers likely to be announced in the new week are mostly going to be dull and the advance income tax payment installments to be made by the corporates on or before 15th are most likely to be dismaying. A Besides, the apex bank may or may not oblige the markets with expected rate cut when it meets on March 19. It can cut the rate by 25 basis points and not by 50 basis points as widely hoped or may keep it unchanged. In any case, the markets have already factored in the hope of a rate cut upto 25 basis points and may go up further only if the cut is larger than that.A The on-going Lok Sabha session is most likely to pass a few important reform Bills which could boost the market sentiments but because of the usual ongoing uproar in the parliament may not give the government even a chance to present or pass the same as it happened in the previous sessions. Then there would be a prolonged uncertainty about the monsoon that would keep the markets under check as it is the biggest factor that has impacted the Indian markets for ages and would continue to do so in the next few decades.
Therefore, it may not be advisable to get tempted to buy shares because they have gone up in the last week. The buying must be aimed only at general declines. The markets are unlikely to stage a runaway boom in the next few days. They are most likely to correct after a small further rise in the next week.