Markets prove resilient

The stock markets on Friday shrugged off the panic seen on Thursday when the Indian Army attacked the terrorist camps in Pakistanoccupied Kashmir, indicating that investors don’t see the possibility of a full-fledged war as neither country can afford one. More than real panic, it was the market participants who were using it as an opportunity to bring down the Sensex, that was on a one-way upward track, making stock prices unattractive. Foreign investors too were wary of investing due to the high stock prices.

The markets went up mildly on Friday and it seemed even the decision by the oil producing countries to curb production didn’t affect the markets much. The rise of nearly two per cent in crude oil price could increase inflation. But it’s too early to tell, so it’s unlikely to impact the monetary policy announcement next week. The economy’s fundamentals are strong and thus Indian markets are doing well. Foreign and domestic investors bought on Thursday even though there was selling at the retail level, indicating the India growth story was still intact.

The next trigger for the markets will be the credit policy announcement on October 4. It will be new RBI governor Urjit Patel’s first policy announcement with the assistance of the newly-created monetary policy committee. It will thus mark the start of a new era, and it will be interesting to see the outcome. Mr Patel is known as an inflation hawk, like his predecessor Raghuram Rajan, and finance ministry sources have already started talking about the room for easing interest rates.