Hopes of good monsoon, resolution of Greek crisis propel markets (Weekly Review)

Mumbai, June 27 (IANS) Hopes of a healthy monsoon and capital expenditure announcements by the government, as also renewed intent of foreign investors and parleys to resolve the Greek debt crisis buoyed the Indian equities markets in the week just concluded.

The barometer index of the Indian equities market, the 30-scrip Sensitive Index (Sensex) of the S&P Bombay Stock Exchange (BSE) gained 495.67 points or 1.81 percent during the weekly trade ended June 26.

The index closed at 27,811.84 points from the previous weekly closing of 27,316.17 points on June 19.

The gain was attributed to momentum that built-up from a six day relief rally in the previous week.

The index had ended the previous weekly trade (June 19) at 27,316.17 points – up by over 3.37 percent or 890.87 points.

“The government announceing three flagship schemes was a sign for the markets that the public sector capex is going to take off. This might lead to better order books for the capital goods and other industries,” Devendra Nevgi, chief executive of ZyFin Advisors, told IANS.

“Any rate cut by the Reserve Bank due to positive data, coupled-with higher government funding will also prompt a similar response from the private sector which might also start their capex cycles,” Nevgi elaborated.

On June 25, Prime Minister Narendra Modi launched the Smart Cities Mission, Atal Mission for Rejuvenation and Urban Transformation (AMRUT) and Pradhan Mantri Awas Yojana (PMAY) which are all intended to enhance the quality of urban living and drive economic growth.

The central government has committed to spend about Rs.400,000 crore ($63 billion) on these missions over the next six years.

According to Dipen Shah, head for private client group research, Kotak Securities, the

the benchmark indices rose by two percent for the previous week on optimism that the Greek issue will be resolved.

“Parleys are going on. There is a hope that the crises will be averted and the creditors and the Greek government will reach a solution soon,” Shah elaborated to IANS.

“In the case of a stalemate the markets have already factored-in a lot of possibilities and the effect of the crises – if it blows-over will be contained.”

Talks to resolve the crises have led the global markets on the edge. Investors are anxious about the fate of Greece in the Eurozone and the role European Central Bank (ECB) would have to play in case of a default.

The Greek government has called for a referendum to let the people decide on the terms and conditions of another bailout.

However, the July 5 referendum will come after the June 30 deadline, when Greece has to repay part of its debt to the IMF (International Monetary Fund).

On June 4, Greece had deferred a payment of 300 million euros that was due to be paid to the IMF.

Other factor that led the markets higher despite global volatility was the fact that retail and domestic investors picked up stocks.

The domestic institutional investors (DIIs) bought stocks worth Rs.549.45 crore during the week under review.

The FPIs (Foreign Portfolio Investors) too showed renewed interest in India and bought stocks worth Rs.445.38 crore.

In May, FPIs had sold stocks worth nearly $3 billion. They had picked-up scrip worth $2.4 billion in April.

Other triggers for the market in the week under review, was the healthy progression of the monsoon rains cited Anand James, co-technical head for research with Geojit BNP Paribas.

“The forecast shows that the monsoon clouds have covered most of the country and that June period’s rainfall is 28 percent more than the average,” James told IANS.

“A good monsoon can translate into better crop production, lower inflation and more possibility of a rate cut, as the RBI said that it will be data dependent while taking decisions on further monetary policy easing,” he said.

James added that the pessimism surrounding possibility of no more rate cuts by the RBI due to the prediction of a drought has been diluted. This, coupled with an increase in crop prices, has also helped investor sentiments.

The government has recently increased the per quintal MSP (minimum support price) for rice by Rs.50 and by Rs.275 for pulses.

(Rohit Vaid can be contacted at rohit.v@ians.in)

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