Mar­kets May Stay Ex­u­ber­ant Amid Gov­ern­ment Ini­tia­tives

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In­dian stock mar­kets seemed to be liv­ing high on the hog, notwith­stand­ing the sell-off from the FIIs. This sell-off cre­ated op­por­tu­ni­ties for bot­tom fish­ing and fetched bet­ter re­turns for do­mes­tic in­vestors who bought on dips. The mar­kets are hit­ting fresh highs ev­ery day, though with some volatil­ity amid cor­po­rate an­nounce­ments and cor­po­rate earn­ings reports. To add to it, the gov­ern­ment's an­nounce­ments too have brought in tremen­dous move­ment in the stocks and sec­tors lately, which are driv­ing the bench­mark in­dices crazy. For in­stance, the pro­posed in­fu­sion of Rs 2.11 lakh crore for re­cap­i­tal­i­sa­tion of PSU banks lifted stocks of PSU banks like never be­fore in in­tra-day trade. Sec­ondly, im­po­si­tion of anti-dump­ing duty on im­ports of stain­less steel lifted stocks of do­mes­tic steel mak­ers more than 10% on a sin­gle day. The ex­u­ber­ant move­ment in the bourses of the world’s largest econ­omy, the US, are off­set­ting the slow­down in the sec­ond largest econ­omy, China, and en­abling other emerg­ing mar­kets sus­tain their peak lev­els.

In this ex­u­ber­ance, the re­turns which in­vestors ex­pect over a pe­riod of time are fetched by traders in a sin­gle day. How­ever, this may hap­pen the other way round too should some cat­a­strophic event hap­pen, wash­ing off all the gains in dou­ble quick time. The ques­tion is whether in­vestors are re­ally ben­e­fit­ing from the mar­kets ris­ing big time. Since the new-based stock-spe­cific moves are pre-de­ter­mined, the in­di­vid­ual in­vestors can hardly en­ter, while on the other hand, the flat mar­ket bias re­frains in­vestors from en­ter­ing other stocks. The big­gest chal­lenge is find­ing ways to en­ter eq­ui­ties and make prof­its. For now, MFs, SIPs, long-term in­vest­ing with time hori­zon of 3-5 years or in­tra-day trad­ing ap­pear to be the only fea­si­ble ways for retail in­vestors.

The mu­tual fund houses have re­mained dom­i­nant and have out­shone the for­eign port­fo­lio in­vestors (FPIs) in the first half of the fi­nan­cial year with in­vest­ments worth US dol­lar 12 bil­lion. Even HNIs as retail in­vestors have poured in a lot into eq­ui­ties. Go­ing for­ward, MFs re­main up­beat over in­vest­ments in the re­main­ing half of the fi­nan­cial year with ex­pected re­cov­ery in earn­ings and RBI’s ex­pected eas­ing stance ow­ing to the favourable macroe­co­nomic num­bers. Smaller cor­rec­tions would be trig­gered by profit-book­ing and news-based volatil­ity in front­line stocks.

The sec­ond big­gest rea­son is gov­ern­ment’s capex plan worth Rs 14 lakh crore in in­fras­truc­ture de­vel­op­ment, in­clud­ing roads, power, rail­ways, etc. The coun­try is near­ing its ex­e­cu­tion pe­riod for Digital In­dia and Hous­ing for All, both of which are ex­pected to cre­ate fur­ther op­por­tu­ni­ties. On an im­me­di­ate ba­sis, mar­ket par­tic­i­pants can count on cor­po­rate earn­ings in H2FY18, fol­lowed by RBI's pol­icy stance on in­ter­est rates and Union Bud­get 2018. The pre­pone­ment of state and na­tional elec­tions to 2018 from 2019 may add some more masala in the recipe of do­mes­tic mar­kets. The global mar­kets too are set to give some more to the in­vestors in the com­ing days, un­less geopo­lit­i­cal ten­sions start heat­ing up again,.

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