The Union Budget has been debated and passed in what would probably be a record mere 8 days. This was a proper debate and not where in the din and melee of the house, the budget gets passed. This augurs well for democracy and India. On the macro front, inflation both wholesale and retail have shown signs of receding. While wholesale inflation has fallen to 5.43% which is a four month low, retail inflation has fallen to 7.31% which is a 29 month low. Trade data for June shows that imports have grown slower while exports have grown faster. However the catch is that despite a duty of 10% on gold imports we have seen a 65% growth year on year and imported gold worth 3.12 billion dollars. Seeing the quantum of gold even though there is a 10% customs duty currently is certainly disturbing.
The incident in Ukraine where a Malaysian jet was shot down and is most disturbing. It’s a global tragedy and for Malaysian Airlines is a double whammy as they will need to be bailed out by the government or they would simply collapse. This downing of the aircraft happened after new sanctions were imposed on Russia by the US. The needle of suspicion would be on Russia as the missile used would have to originate from Russia but we all know that after the states of Russia separated many arms were available in the free market as well.
The relief was that even after this incident markets recovered and the Dow Jones closed at 17,100.18 points a weekly gain of 156.37 points or 0.92%. In India too our markets recovered from their previous week’s losses and the BSESENSEX gained 617.21 points or 2.47% while the NIFTY gained 2.74%.
The markets have in the previous two weeks made a top of 26,200 and a bottom of 24,900. This seems to be a broad range for the markets for the next few weeks with an upward bias. Similar levels on the NIFTY were at 7,800 and 7,425. I believe there is no real danger of the downside being broken but slowly but surely the upside would be broken. A good time for that to happen as we get closer to July series futures which expires this time on the 31st of July.
RBI gave a big boost to the markets after it announced that long term loans given to infrastructure projects would not be subject to CRR and SLR requirements. This boosted the banking sector which gained 6.44% for the week.
Going forward with a government bent on delivering and having serious intent to improve the nation, the markets have to respond positively. The setting up of BRICS bank would go a long way in using China’s reserves for India’s infrastructure needs.
In a late night deal the 15% stake held by Financial Technologies in MCX has been sold to Kotak Mahindra Bank at Rs 600. This is at a huge discount against the market price of Rs 780. It’s a fire sale by FT group and they had no other option, advantage of which has been taken by the buyer. In the short term there could be a knee jerk looking at the almost 23% discount, but over the longer term it’s a win-win situation as MCX would now be allowed to function without the hangover of the FT group and its issues on account of NSEL.
The markets are well set to move upwards and it’s a good time for investors with a long term perspective to enter the markets.
