Random Thoughts on Markets

Positive signals coming in from the Govt. Divestment, National Unique Identity programme, Direct Tax Code 2009, etc. But reforms on Insurance and Pension still pending. 3G auction pending. These remain the key triggers.

Two Index heavy-weights stocks (RIL and Bharti Airtel) are  facing unknown events. Any positive news on these will take markets higher.

FII inflows till date have been around $6-7bn. India can see inflows back to the FY08 levels or even more i.e $15bn-18bn. Big Boy of Dalal Street LIC can’t increase stake in most of the Index companies while most of the FII inflows have been coming through Exchange Traded Funds. Rupee could trade at 42-43 levels by the end of FY10.

Monsoon impact on earnings should be marginally negative.  FMCG companies should pass on the increase in prices to the consumer while Autos should continue to benefit from low interest rate regime.

Low base effect will make sure that every headlines sound like “Ahead of expectations”.

Fiscal deficit not a major concern as long as there is an improvement in the global economy. Finance Ministry has considered crude @ $80 while calculating subsidies. However, its diificult to take a call on the outlook for crude oil.

Demand for Real-estate is highly dependent on the IT sector. There is no major recruitment in the IT sector yet so it is difficult to see the demand coming back to 2007 levels in the near future while low interest rates might offset the same to a greater extent. What happens when the interest rates go up remains to be seen.

Impact of global inflation and rollback of stimulus package remains to be seen. This could turn out to be risks on the downside.

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