‘Market rally to go on,govt willing’

In the first thirteen trading sessions of this year,BSE Sensex has risen by over 1,000 pts.

The Sensex at the BSE has jumped by over 1,000 points on the back of domestic factors such as softening on the inflation front,better than expected industrial growth numbers,the governments move to arrest capital outflow and improved inflows from foreign institutional investors (FIIs).

Experts say that the current rally is being fuelled by an improving domestic environment and would need the government to act on reducing fiscal deficit in order for it to continue.

In the first 13 trading sessions of 2012,the Sensex has risen by 1,011 points or 6.5 per cent and has quickly moved from 15,454 (closing on December 30,2011) to close at 16,466 on Tuesday.

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The decline in the Indian markets in 2011 was more on account of domestic issues and with inflation coming down,indications of softening in interest rates and government taking steps to arrest outflow of capital are the reasons that have led to the rally and this can continue, said CJ George,managing director,Geojit BNP Paribas Financial Services. FIIs have invested Rs 3,283 crore net in equities in January,which is the highest net inflow witnessed in a month since July 2011.

While there are concerns on fiscal deficit and European issues,there is a realisation in the market that the underperformance over the last 12-18 months have factored them and now with inflation coming down there is an expectation of interest rates cut by RBI of up to 150 basis points in this calendar, said Gagan Randev,CEO,Religare Securities.

In situations when the inflation is coming down,a cut in the fiscal deficit will bring in a combination that may substantially increase the scope of monetary easing which will be very positive, said S Naren,CIO-equity,ICICI Prudential AMC.

The government on Tuesday increased the import duty on gold and silver in an attempt to curb the outflow of the dollar from India and market experts have supported the move.

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Experts feel that while the market may dip in the first quarter of this calendar,there is a significant upside for investors.

Our one year view of Sensex is at around 20,000 levels and that means 20-25 per cent gains from current levels. I think it is a good time for investors to get in and start investing, said Randev.

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