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Straight from the Specialists

India Markets Weekahead: Quality stocks to stand out in next rally

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(Any opinions expressed here are those of the author and not of Thomson Reuters)

Reality finally dawned on the markets and we saw a sharp correction in the last two trading sessions. The Nifty closed at a two-week low of 7603, down 2.41 percent for the week.

Modi mania seems to have abated temporarily and international developments played a bigger role in influencing sentiments. The quarterly results have so far been mixed but decisively points to a slower growth this quarter.

People watch a large screen displaying the benchmark share index on the facade of the Bombay Stock Exchange (BSE) building in Mumbai December 9, 2013. REUTERS/Mansi Thapliyal/FilesThe fiscal deficit in the first quarter has already crossed 56 percent of the annual target, and one wonders how the government will achieve the steep revenue target unless the economy starts firing on all cylinders. As of now, that seems a few months away.

The monsoon improved dramatically, but deficit still hovers at 22 percent. Haryana, Punjab and western UP witnessed intermittent rains, which is a concern. Late rains could improve the statistical data but would create practical issues for agricultural production.

How to get India on the highway to high growth

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(Any opinions expressed here are those of the author and not of Thomson Reuters)

The president’s address to parliament this week lays out the new government’s roadmap to get India’s economy back to high growth. That will take time and is not easy either.

True, the BJP government led by Narendra Modi inherited a weak economy – growth was a mere 4.7 percent; industry was static; there was no employment generation; and inflation was at over 8 percent. The only comfort was that foreign exchange reserves exceeded $312 billion.

India market weekahead – Partial profit-booking may be prudent before election results

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(Any opinions expressed here are those of the author and not of Thomson Reuters)

The so-called “rally of hope” stuttered during the week as Indian markets turned volatile. The Nifty closed at 6695, down 1.30 percent. The fear of the El Nino effect and the IMD forecast of below-normal rainfall seems to have made investors cautious.

With election results two weeks away, investors need to take a stand in the next few days. Although there can be a number of outcomes, only two would be termed positive for the markets – a landslide victory or a comfortable majority to form a stable government. The other scenarios such as a fractured mandate, a third front coalition or a weak UPA or NDA coalition would deflate the sentiment built up till date as the markets have already discounted a favourable outcome.

India Markets Weekahead – Volatility seen as RBI policy review in focus

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(Any opinions expressed here are those of the author and not of Thomson Reuters)

Volatility is here to stay and trying to predict the markets on a daily basis is a futile exercise. It’s no better than tossing a coin.

Monsoon rains are early and heavier then normal, raising the hopes of green shoots in the next few months. Macro numbers were showing signs of bottoming out but the rupee slide has thrown calculations awry. A feeble request by the finance minister urging people to shun gold won’t do much good in a country enamoured by gold.

Why the RBI should cut rates again

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(Any opinions expressed here are those of the author and not of Thomson Reuters)

In May, the Reserve Bank of India (RBI) had hesitatingly cut the repo rate by 0.25 percent, which made no impression on the stock market or commercial banks. That was because both expected the cut to be more substantial. But the RBI had not obliged.

Perhaps the monsoon, which arrived on the dot and is progressing satisfactorily, may make some difference to the RBI’s expectations of food inflation – which had been its principal reason for hesitancy. While it’s too early to predict monsoon behaviour for the rest of the season and the likely improvement in agricultural production, it does appear the improvement should be significant and inflation dampened perceptibly. Reduction in inflation, however, is not the only reason why the interest rate should have been cut.

No silver lining in this monsoon cloud

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(The views expressed in this column are the author’s own and do not represent those of Reuters)

India’s monsoon rains have been delayed and were already 30 percent deficient by the end of June. There are doubts whether rains will pick up during the rest of the season. August and September are likely to be dry which will damage crops and reduce farm incomes.

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