Friday, March 14, 2014

Markets at life high but volatile

After crunching and falling to all time lows for about a year, the Indian stock market has seen nothing less than a miracle in the last fortnight. Now, whether this is a miracle for the tumbling Indian economy or for the ruling Congress led UPA government is still a question.

Despite the turmoil caused by the geopolitical tensions over Ukraine, the economic barometer of Indian economy, Sensex, has spurted to all time highs breaching the 22000 point mark. The spurt is being attributed to a slew of positive domestic factors which have ultimately led to the robust inflow of FIIs (Foreign Institutional Investors).

The positive sentiment on the Dalal Street is being attributed to the reduction in inflationary pressure, narrowing CAD (Current Account Deficit), and favourable results of the opinion polls.

While the Trade Pundits were banking on Modi as the “only hope of the stock market”, the new data have shown that even a stable third front atimages (1) the Center can propel the economy to newer highs.

The dependency of the Indian stock market on the FIIs is not a hidden fact. The unfavourable economic data being released by China and Japan have also resulted in the foreign investors banking on India.

Although brokers are betting big on this pre-election rally of the stock market, yet the market doesn’t seem to be stable. A plunge in the IT stocks led basically by the Infosys, spooked the Dalal Street on Thursday. Moreover, it is being said that any further rise in the value of rupee might be detrimental to the country’s exports on whose back the economy is seen to be reviving.

This instability in the economy does not only come from the Dalal Street but also from the vulnerabilities in Parliament. What is needed is a strong platform being built by the new government which is capable enough to carry the pressure of the internal and external turmoil and also back the national and international sentiments with stability. Now that platform can be NaMo’s ‘56 inch ki chaati’ or RaGa’s ‘deeper democratic set up’ or even the fledgling third front.

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