30 Years Of Covering Mumbai
Home > Business & Investment > Stock Markets To Scale New Heights

Stock Markets To Scale New Heights

Monday, February 23, 2015
By Clifton Desilva

Clifton Desilva is an investment expert and a Director at Altina Securities.

The stock markets after reaching a peak on 29th January 2015 with the Sensex soaring to 29,682 and the Nifty to 8966 underwent some correction and have now once again bounced to peak levels. The corrections that took place were mainly concerns of below than expected Q3 quarterly numbers, the victory for the Aam Admi Party (AAP) as well as the Greece crisis. The BJP government till recently was performing extremely well at the polls and their defeat in the Delhi Assembly polls led market men to believe that the reform agenda of the Modi  Government  may be slowed down.

Stocks like Reliance Infrastructure and Tata Power took a hit, as it was feared that their performances may be affected given the AAP stand on electricity tariffs, Also DLF took a hit on the AAP stand on Sonia Gandhi’s son in law land deals.However these fears were misplaced and the stock markets took these events in its stride and once again are on an upward journey featuring in a pre budget rally.

The markets are now expecting a reform oriented budget. Will the markets will move up further post the budget or witness a correction? The answer to a large extent depends on the set or expectations being built up prior to the budget and the exuberance in stock prices. If the expectations built up are euphoric in nature and the budget does not meet these set of expectations there are chances of a decline in stock prices post budget. However should a correction take place, it would amount to a short term aberration which is more sentimental in nature, while the long term positive outlook for the stock market remains intact.

The long term outlook for the markets is bullish and is based on the premise that the Indian economy which was in a slow down mode is now in a revival mode, several factors accounting for the renewed bullish outlook. The Indian economy stands to benefit substantially on account of a steep fall in commodity prices especially crude oil as India is as major importer of crude oil which in turn was responsible for  putting a lot of pressure on  the current account deficit. Now with crude oil prices at low levels the current account deficit appears to be in a comfortable zone. Inflation also is moving southwards which provides scope for the Reserve Bank of India to cut rates.

Interest rates are expected to scale down going forward which in turn will revive the Indian growth story of investment and consumption. The government appears to making all out efforts to kick start the economy. Once consumption picks up investment from the private sector too will kick in.

The housing sector and the auto sector are the two determinants of consumption and these two sectors were in a slowdown mode. There are hopes that the budget would focus on spurring consumption especially in the housing sector by providing the necessary sops.

Housing is very important infrastructure. The economic growth in the US over the past decade and China over the past five years was driven by housing. Housing provides better quality of life leading to better productivity and is also a massive multiplier. Mortgage Companies like HDFC and LIC Hsg Fin offer great long term potential.

The cut in interest rates going forward should also benefit the auto sector as well as the financial sector. As interest rates fall growth momentum is expected to pick up resulting in tax buoyancy. The drop in oil prices impacted positively the current account deficit, fiscal deficit, inflation, rupee etc and therefore  with an expected drop in interest rates a host of benefits will accrue. The banking sector especially the Public sector banks which are low on asset quality will see a huge turnaround once the investment cycle kicks in. At present most of the banks in the public sector are quoting at depressed prices and have huge potential to post gains in the years ahead. Public sector banks like State Bank of India, Bank of Baroda, Canara Bank, Union Bank, Punjab National Bank and Bank of India appear to be great picks for investors who have a long term horizon.

Roads, Railways, Defense, Power are other sectors where substantial investments will be committed going forward.

 In summary even if the budget does not meet the set of expectations and witnesses  a correction, the long term outlook of the market remains bullish and are poised to scale new heights going forward and any corrections should be used to acquire stocks at lower prices for long term capital gains.

No Comments Posted
City news
Following intelligence inputs, the police are tak
The police had described the death of the ...
Most of Maharashtra’s children will drop out or ...
My wife and I have been having a very disturbing
Dr. Rajan B. Bhonsle, M.D. (Bom)
Consulting Sex Therapist & Counsellor
Dr. (Mrs.) Minnu R. Bhonsle, Ph.D.
Consulting Psychotherapist & Counsellor
Select Sun sign:
Aries (Mar 21 - Apr 20)
Aries (Mar 21 - Apr 20)Patient and prudent efforts can prove to be fruitful, particularly regarding money matters. Be more prompt with your work and duties as you are inclined to take it a little easy. Though you have nothing to fear but others could take advantage of the situation. A casual Acquaintance could now become a more meaningful association. There are romantic undertones though nothing is spelt out.
Tarot for Love
Select Sun sign:
Aries (Mar 21 - Apr 20)
Aries (Mar 21 - Apr 20)What the cards say: Be generous and give Path: Don’t expect returns. Don’t be rash and reckless Ally: Virgo will cool you down. Avoid Cancer and self centered approach Card for the week: Tarot key no. III The Empress. Abundance is coming your way. Giving and enjoy giving is the way to richness.
- Advertising -
No, we aren’t talking about relationships; we’re
Month after month, it gets more difficult to pick
Have you ever put on a pretty top and necklace, o
Read More