Turnaround despite adverse global cues.
R Chandrasekaran
The domestic card played its tricks in sending the Indian stocks higher on Tuesday even as the global cues were not in favor of such a strong surge.
If the inflation data for March has allowed investors to be optimistic of interest rates cut from the Reserve Bank of India, the easing of oil price and the sharp fall in gold prices would result in improved current account deficit. The significant drop in yellow metal and silver price has also driven investors towards equity market.
India has been struggling with deteriorating current account deficit and fiscal deficit. The sharp drop in oil price means that its subsidy on oil and gas will get reduced in the current fiscal year. While the government has allowed oil marketing companies to fix petrol prices in tune with international prices, diesel price is being de-controlled on a staggered manner by allowing oil companies through a small monthly hike. The reduced subsidy burden will also bring down inflation in the coming months, which will help the RBI to satisfy industry on the liquidity as well as interest rates.
Rating agencies such as Standard & Poor’s and Moody’s have been threatening to downgrade India’s sovereign rating in the absence of concrete steps to bring current account and fiscal deficit under control.
Given these ground realities, the favorable conditions have allowed investors, both domestic as well as foreign institutional investors, to shop heavily of their favored stocks in the hopes of positive macro picture in the days to come.
The Bombay Stock Exchange’s 30-share barometer jumped 2.11 percent or 387.13 points to close the day at 18,744.93 points. The strong uptick in the benchmark index is the biggest one in more than six months. Similarly, the National Stock Exchange’s Nifty climbed 120.55 points or 2.16 percent to close at 5,688.95 points.
To contact the author, e-mail: rchandrasekaran@americanbazaaronline.com