Rally may sustain, say market players

Rally may sustain, say market players
Business Standard, Money & Markets, April 7, 2009, Section II, Page 1

BS Reporter / Mumbai

The equity market is expected to see some more improvement going forward as market players believe that the $1.1 trillion G-20 stimulus package will have a definite positive impact.

The stimulus has raised hopes of recovery in global economies and funds that had been sitting on huge cash piles have already started putting money in potentially strong markets.

Most markets had already risen by nearly 20-25 per cent on hopes of some G-20 stimulus – a trend that continued on expected lines after the package was announced. The current uptrend is being viewed as the first signs of a revival in the real economy as the stock market recovery always comes first.

The Indian market at present is dancing to global tunes but it also has its own issues. Macroeconomic data such as shrinking exports and widening current account deficit have had negative impact on the market.

“Historically, macroeconomic data reflect a grim picture but the market always precedes an economic recovery,” said Kamlesh Kotak, Senior Vice President, Asian Market Securities. Even foreign institutional investors (FIIs) have turned positive on equities, he added.

Jigar Shah, Research Head, Kim Eng India, a leading South Asian FII brokerage house, said, “The recent rally may sustain as it is based on the optimism globally. Also, some investments have been coming back to emerging markets.”

However, he said, it was too early to think that the worst was over and corporate earnings that were expected in coming weeks might not be good. Political uncertainty was also there, he added.

Derivative market indicators also suggest that some more steam is left in the current rally. “Implied volatility, based on trading in options, has come down, indicating that volatility has reduced and the market will continue to move in the direction in which it has been moving since last few days,” said Sidharth Bhamre, Head, Derivatives and Investment Advisory, Angel Broking.