What a week it was!!! A decisive mandate after 20 years, India electing a pro-reform government with a highly acclaimed Narendra Modi leading it, one who has an impeccable track record as far as good governance and economic reforms are concerned. What else could the investors wish for!!!
Swearing in is supposedly on 21st May, Wednesday and the key portfolio allocation in finance, commerce and industries will be watched out for.
The hopes are high but the road ahead is not going to be easy because of so much of froth in the system due to misgovernance in last few years.
For the time being, the global rating agencies which were to declare the verdict soon after the elections, would be very much satisfied with the outcome of the parliamentary elections – stable pro-reform government was a requirement so that India doesn't get downgraded and India has given just exactly that. Also the macros have improved considerably in last one year or so – given the efforts put in by Raguram Rajan, RBI Governor and ex Finance Minister P Chidambaram.
Apart from the portfolio allocation and the future heads in the respective ministries, the key would be the interaction between the RBI and the government.
Given a major domestic event being over now, I guess the markets will be more correlated with the global events, something which was being ignored for last few months.
FII inflows which are expected to surge given the verdict meeting out the FIIs expectations, would be keenly watched. Lately we have also seen an increased participation by domestic investors in the Indian equities, especially in last two weeks, and this would also be a key monitorable.
I believe the euphoria would continue till the budget, which will be announced sometime in July, in hope of big ticket reforms and maybe after that too, incase the hopes materialise, the rally is expected to continue albeit with much decreased volatility.
At the fag end of the earnings season, the key earnings this week would be ITC and SBI on Friday.
Key market moving global announcements this week are: Thursday – China: HSBC Manufacturing PMI; US – Existing Home Sales. Friday – US: New Home Sales.
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Week ahead: Ministry allocation in NaMo govt, FII flows key
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