Market all set for a ‘March’ Forward. It is ready with all ammunition to overcome the obstructions like Feb 24 F&O settlement, Friday’s Maha Shivaratri trading holiday followed weekend. On last Friday, the benchmark BSE 30 Index revisited the five- month high at 28,468.75. Both the NSE and BSE key indices have been closing at higher levels for four weeks. It is a welcome trend.
The union budget, after considering the policies of the newly inaugurated US President Donald Trump, and took a note of the ongoing speculation about the Fed’s Rate hikes in 2017, while limited the Fiscal Deficit ratio to 3.2%, Reserve Bank of India decided in favour of the growth rate to be flexible about inflation rate, the swelling FOREX kitty of $ 360 billion, target to reduce the current account deficit from 2.1 to 1.9%, etc. things will keep the FIIs crazy on India. Since various decisions that include the scrapping of FIPB and allowing foreign direct investments in automatic route in different sectors are coming into force, overseas funds will flood Indian capital markets taking their depth and breadth to record levels.
The FDIs that flowed into the country in the first nine months of 2016-17 grew by 22% to touch $ 35.8 billion, from that of the same period a year ago. The total dollar flows including other investments in the first nine months and for the full year stood at $ 48 billion and $ 55.5 billion respectively. For the current financial year, the flows will be much higher. While there was a 13% decline in FDIs world over, India witnessed a growth in the inflows, though the demonetization and some slow economic activity prevailed in the country. It reflects the growing interest in India from overseas funds and businesses. The 295 foreign investment proposals worth $295 billion will add much depth to the markets. Last week when RBI increased the FII investments limit, within hours the limit again reached to the new maximum limit. It is such an example that reveals the rock-solid confidence of foreign investors in the Indian economy.
The has finalised a specific time-bound plan to get the shares of the public sector undertakings (PSUs) on the stock exchanges. While the 45 out of the 157 PSUs already listed, the remaining 112 also to be joined their counterparts in the following six months. The strategy is to complete the programme in the following the 165 days, once it begins. These 112 PSU listings will further enhance the market size.
As proposed in the latest budget, the government is going to connect both the cash and futures markets in the commodities segment. Moreover, the Foreign Portfolio Investors, mutual funds, insurance companies, banks, Domestic Institutional Investors (DIIs), and alternative investment funds will get the permissions within one month to trade in the commodity derivative markets. Options Trading in Commodity Future contacts will come real soon. With the new instruments and linkages, investors will have multiple opportunities by trading in different combinations and permutations. India is going to introduce benchmark prices for many commodities and metals like Brent is for oil price.
With the said macro factors, a level of 28000 will become the new baseline for the 30 share-Sensex. However, the short-term factors may create hurdles to the up-trend. The looking up crude prices because of increased supplies owing to OPEC’s policy, increasing the metals and commodity prices globally, rising steel prices, etc. may depress the corporate performance. Since the wholesale price Index (WPI) based inflation for January 2017 had touched a 30-month high of 5.25%, RBI may not ease the interest rates for the time being. It will continue the current 6.25% Rate. One more factor is that the PE of indices has been hovering at nearly 20. The desirable PE is 16-18 only. So, these factors influence the near-term trend.
The major recurring expenditure for the aviation industry is oil only which is gradually picking up. Spice Jet’s net profit for the Q3 FY17 has come down by 28%. In the coming- days also, airliners may face profit falls. It is the right time to book profits in Spice Jet and Indigo stocks.
All the shares of front-line sugar companies appreciated greatly. Now the turn is for the second-line enterprises that are coming out of woods with an excellent performance. Their stocks will see a splendid growth in prices in the coming days. Track the shares of Kesar Enterprises, Bajaj Hindusthan, Simbhaoli, Thiru Arooran. The country is moving towards a 15% severe shortage of sugar reserves which is 50% higher than the earlier estimate of 10%. The Q4 will be bountiful for the industry. Clarity about the new crop area by the first of week of March and El Nino effect on the harvest in 2017-18 will decide the future course of prices. The crushing season in Maharashtra this time limited to 100 days only. The centre may probably announce the sugar policy to facilitate an import of 1.5 million tonnes of sugar.
The RP Goenka group companies were on a fly last week. They are set to give a great appreciation. CESC Ltd, Phillips Carbon Ltd, Harrisons Malayalam Ltd, First Source Solutions Ltd, RPG Life Sciences Ltd, Ceat Tyres Ltd… all these companies belong to this group only.
To sum up, the market is favourable for long-term investment.