Monday, June 2, 2014

Sensex post elections, RBI policy, Budget!

Sensex post elections, Budget & RBI policy will be important! 
The below article was published in Economic Times section of NavBharat Times today morning:
Sensex post Election results: Sensex ended the month of May with a strong gain of nearly 8%. The main factor that was responsible for such strong gains is the expectations of stable government so that the policy decisions can be taken at faster rate and the environment remains more conducive for Institutional investors. However after the Elections results were announced on16th May the index jumped making a high of 25375 i.e. above the psychological 25k mark but failed to sustain there and closed near day’s low on same day. The low and high made on that day was near 23870 and high was at 25375. Since then Sensex has not moved above the high or below the low of that day. From technical perspective a big bar made on day of event forms very important support and resistance and break of the above mentioned levels will be important for the trend in coming week.
India’s GDP growth: The GDP data released last week showed weaker than expected growth at mere 4.7% for the year 2013 – 2014. This data has been below the government estimates of 4.9% itself. GDP growth has remained below 5% for 2 consecutive years after many years. This itself is suggesting that there will be lot of pressure on the new Government given the subdued growth and the RBI stand to focus more on inflation rather than growth is also going to be challenging. However, the GDP data is declared for the past year and sentiments are positive that the new government actions will be impacting the economy positively over coming years!
Upcoming Budget:The forthcoming Budget will be important factor and the expectation is that more focus will be given on reviving the business confidence and fast implementation of pending projects and policies. Markets reaction to the Budget will be crucial and it will be important to observe if the day can cheer Dalal Street
RBI policy:All eyes will be on RBI policy which is to be announced on 3rd June i.e. tomorrow. It will be important to see if amidst the slow growth RBI can take more liberal stand whose actions so far has been focused more on inflation rather than growth. In current monetary policy we expect RBI to maintain its “status quo” and will not make any changes to key policy rates. 
Week ahead: The rally in Indian market which started in August 2013 was majorly driven by expectations of stable government and elections. Now that the news is out there are lot of expectations from everyone from our newly elected PM Mr. Modi and its Mantri Mandal. Next few months will be crucial and market participants will closely observe how quickly the implementations and executions of various policies can be done. This will put lot of pressure on new government and any short of expectations can result into negative trigger. Over short term, prior week formed a bearish bar and index closed near the weekly lows at 24,217 levels. Further move below 23870 will result into a deeper correction and will indicate Sensex can trade subduedatleast for few more weeks and can start the correction of big rally that started in August 2013.
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