Indian market did what it does best - mirror the US market. As the US Federal Reserve signalled prolonged economic pain and long path to recovery for the US market, global markets were quick to react.
Dalal street seems to have finally woken up to the reality and uncertainties of the economy. The palpable unease was clear with the way the market was moving in the last couple of trading sessions. However, it took the US Fed's message - “The American economy faces a long road to recovery” to convey that all is not well.
Tracking Unlock 1.0:
Since the unlocking activities began, macro indicators indicate that on-ground activities have started to resume. India's fuel demand nearly doubled in May to 14.65 million tonnes, (47.4% higher than in April). However, it is still 23% lower than last year.
Petrol and diesel sales in May, increased by 82% and 69% respectively from April. However, fuel consumption is expected to take a beating once again with the onset of the monsoon season.
Bring on the reforms:
S&P global ratings have called for bolder reforms to bring the Indian economy back on track. In their opinion, labor market and Insolvency and Bankruptcy Code (IBC) related reforms would be far more effective than offering a fiscal stimulus.
S&P has also reaffirmed India's sovereign rating at 'BBB-' with a stable outlook. It has certainly come as a relief after the Moody's downgrade last week. However, S&P sees the risk of a rating downgrade if the growth doesn't recover in the next year.
Key takeaways:
Foreign Institutional Investor (FII) driven investments have helped the Indian market to a large extent in the current month. But the US Federal Reserve has served a timely wake-up call. Foreign investments are pivotal to keep our market moving and are going to decide its fate in the coming days.
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