Saturday, July 7, 2012

Market likely to remain bullish on hopes of major reforms

The stock market is expected to remain bullish with indices likely to open on a positive note on Monday amid government moves to initiate major reforms and easing of euro-zone debt troubles.

"The underlying bias has improved but further gains will hinge on policy interventions by the Centre to restore investor confidence," said IIFL's Head of Research Amar Ambani.

Markets zoomed last week after Prime Minister Manmohan Singh took additional charge of the Finance Ministry -- following Pranab Mukherjee's resignation to contest presidential elections -- and asked officials to help revive "animal spirit" in the economy.

Pushed by Singh, his top advisors, including Planning Commission Deputy Chairman Montek Singh Ahluwalia, and bureaucrats have started working overtime to deal with economic slowdown and low investor sentiment.

Investors also cheered the Finance Ministry's proposals of a monetary limit for invoking GAAR and use of the tax-avoidance rules only in cases where FIIs choose to take the benefit of double tax avoidance treaties.

The BSE 30-scrip benchmark Sensex moved up 2.69 per cent to close the week at 17,429.98. The index had surged by a whopping 439 points, its biggest single-day gain in 2012 so far, on Friday on the back of clarity on tax-avoidance rules and upbeat global sentiment.

Besides, in the forex market, the rupee - which has lost over 25 per cent against the dollar in the past 12 months - staged a strong comeback as it recorded the second best gains of 119 paise in nearly a decade on Friday.

"Markets are likely to open with a bang on Monday but may shed some gains as the day progresses on back of profit- booking," said Kishor Ostwal CMD of CNI Research.

"As far as July is concerned, markets are expected to remain buoyant amid expectations of announcement on reforms path, including allowing foreign direct investment in multi-brand retail and aviation," he added.

Besides, first quarter (FY'13) corporate earning results, which will start trickling from the second week of July, will provide triggers for investors.

Ambani said auto and cement stocks will be in focus as companies from these two sectors start unveiling monthly sales data from Monday (July 2).

Policy initiative in Europe to ease the euro-zone debt crisis will also aid investor sentiment.

"With EU leaders intent on not allowing major defaults or bankruptcies, focus will likely shift to inflation and government reforms. We remain optimistic on the reforms front with the Indian PM now handling the Finance portfolio also," said Dipen Shah, research head at Kotak Securities.

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