Indian Equity Market: Boom Time In Dalal Street

Indian Equity Market: Boom Time In Dalal Street

According to the HSBC survey conducted recently, manufacturing and services sector in India has grown at a faster rate than China even as marketing output was, to quote the report “in low gear” in the month of May. The HSBC composite index for Indian which maps manufacturing and services was at 50.7 compared to 50.2 for China. The other BRIC nations did not fair better. Russia stood at 47.1 and Brazil was at 49.8.

Disappointing performances across large markets in May were a norm but the silver lining in the dark cloud is that both China and India have returned to growth. The Wisdom Tree India Earnings or EPI rose with news of formation of the NDA government which is way better than Indonesia still in the red and a month away from presidential election. The Modi Wave seems to be gathering momentum when it comes to Dalal Street.

To quote the Reuters report, investors are headed for an “endless summer”. The benchmark Sensex reached historic levels while closing above the 25,000 mark as foreign investors snapped up resource and infrastructure stocks. The NSE Nifty climved to 71.85 points or 0.97% higher to close at new peaks. The latest European monetary policies announced by Draghi of the ECB have also brought good cheer.

Indian equities are benefitting from the European announcement to a far greater extent than their counterparts in BRIC nations or even Poland. Ernst & Young has also indicated that India's GDP will expand by 6.2% and may even reach the magic number 8% in the next 3 years. Combining structural correction with confidence in the Modi government and good global economic climate are the triumvirate India needs to grow.

India's economic growth rate has remained below 5% for the second year now. In the words of an HSBC analyst, India has moved from a “gasping elephant” to a “Bengal tiger.” Caution should be tempered with euphoria, but then that would hardly be counted as euphoria then. Congress strove to serve the poor but faced the ire of those who had to suffer from inflation due to policies. Corruption scandals were always a reality in the Indian scene, but a few well timed scandals did their damage for this party which was swamped by the anti-incumbency factor. A strong leadership of the NDA government may now aim to be the change agent India needs. Investors are certainly viewing the Indian growth story as more positive now, going by reports in international media.

But when it comes to the Indian rupee, the opinion remains divided. India was considered to be one of the “fragile five” as its currency weakened the most against the dollar compared to other BRIC nations. Rajan-Modi are the new dynamic duo of the Dalal Street as investors pour in their money. We may be headed for a long term bull run, but a word of caution is always a wise choice. Investing is all about putting your money in channels that will grow. The Modi Wave eclipses India, but now we need a rising tide to overcome the hurdles that lie ahead. India's dynamic duo have their task cut out for them. Hopefully, they will win against the odds.
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