Positive macro data, big ticket policies buoy equity markets

Mumbai: The government’s big ticket flagship programme announcements coupled with a slew of positive macro economic data and factoring-in of the Greek loan default buoyed the Indian equity markets in the week that just concluded. The barometer index of the Indian equities market, the 30-scrip Sensitive Index (Sensex) of the S&P Bombay Stock Exchange (BSE) gained 281 points or 1.01 percent during the weekly trade ended July 3.

The index closed at 28,092.79 points from the previous weekly closing of 27,811.84 points on June 26. The index had ended the previous weekly trade (June 26) at 27,811.84 points – up by over 1.81 percent or 495.67 points. A slew of positive macro data during the week cheered the markets. Most notably was the data that showed an increase in government’s spending.

India’s fiscal deficit in the first two months (April-May) of the current financial year touched Rs.208,624 crore, or 37.5 percent of the target 2015-16. Another set of data showed that a major index for select factory output jumped by 4.4 percent in May from a decline of 0.4 percent in the month before due to healthy rise in coal, electricity and refining production.

After announcing three flagship housing schemes, the government launched its Digital India campaign which had the India Inc. committing Rs.450,000 crore (some $75 billion) for the initiative. “The Indian markets, equity, debt and bond have been very resilient to the Greek crisis. We did not see any major fall, on the other hand there were sessions of gains that the markets were able to make,” Devendra Nevgi, chief executive of ZyFin Advisors, told IANS.

“India’s fundamentals are very strong and soon the domestic factors will be back into the focus. The government’s recent big ticket announcements also gave positive to cues to the markets,” Nevgi cited. According to Nevgi, the take-off of the government capital expenditure will also revive private capex which will have a multiplier effect on the overall economy. “The government’s and the private capex should now take-off and this will revive the economy. Government’s announcement’s on Digital India and Smart Cities are laying foundation for future growth.”

Jayant Manglik, president for retail distribution with Religare Securities said that there is a possibility of a positive bias to continue in the Indian markets but with some intermediate jitters as a initial reactions on the outcome of Greece referendum. “Hopefully, the prevailing uncertainty on global front would end by this weekend after the Greece referendum,” Manglik said.

Dipen Shah, head for private client group research, Kotak Securities, the benchmark indices rose on optimism that the Greek issue will be resolved. “The markets seemed hopeful that the outcome of the Greek referendum will not have any significant repercussions on the global economy and especially India,” Shah elaborated to IANS.

The Greek government has called for a referendum to let the people decide on the terms and conditions of another bailout. Other analysts point at the fact that Indian markets have become slightly attractive and that the local investors participated to cash-in on the opportunity.

“We have also seen the foreign investors as being net-buyers consistently in the last week. Though their investments have been very minor,” said Anand James, co-head technical research desk, Geojit BNP Paribas. “A slew of positive macro numbers also supported the market rally. There is also a hope of better first quarter (Q1) numbers due to be released soon,” he said.

James added that the fall in crude oil prices on June 2 from $59 per barrel in the futures market to below $57 per barrel brought cheer to the Indian markets.

India is a major importer of crude oil, with over 70 percent of its demand met by imports. The crude oil’s sharp fall follows the US data showing higher inventory rise.

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