Geo-political tensions likely to set tone

Spooked by concerns over refund of over `65,000 crore claims under the GST regime, heightened tensions over North Korea and unwinding of positions due to ‘acrophobia’ over valuations; markets have corrected sharply posting their biggest single-day fall in 2017 during the week ended.

The benchmark indices Sensex and Nifty ended lower by 350 points and 121 points at 31,922 and 9,964 respectively.

After the recent rally, price to earnings multiple has risen above 26 for Nifty index making valuations expensive and India becoming the most expensive stock market in the world. Observers say that Q1 earnings have hardly recovered enough and were bad even for some of the blue-chip companies to justify such exuberance.

Shift from traditionally preferred investments in tangible assets like property or jewelry towards financial assets has seen huge inflows to domestic mutual funds.

Stimulus package to revive the economy is on cards say government sources. Strong rebuttal from finance ministry over fears of GST dues may improve the sentiment. The government investment is the only good way to stimulate demand, yet the government is reluctant to increase spending too much say observers.

More spending by the government would help boost the economy and spur investment from private sector also helping the economy to regain traction in growth.

Near-term direction will be dictated by geo-political developments over North Korea, investment by FIIs and DIIs, F&O settlement, the movement of rupee and crude oil prices.