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Reforms, rate cut and rupee movement to propel markets: Experts
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Rohit Vaid | 17 Aug, 2015
Hopes of further economic reforms, rate cuts, range-bound commodity
prices and stabilisation of the yuan and rupee are expected to propel
the Indian equity markets during the upcoming week, experts said.
"Investors
have appreciated the government's effort in trying to pass key economic
legislation in the (just-concluded) monsoon session (of parliament).
Markets believe that the government will be able to meet the GST (Goods
and Services Tax) roll-out deadline," Devendra Nevgi, chief executive of
ZyFin Advisors, told reporter.
"There are solid hopes that the
government will either call a special or joint session of parliament to
get the GST bill passed. If this happens then it will send in a very
positive signal to the world that India is serious about reforms and
ease of doing business," he added.
Lately, investors have been
reluctant to place bets given the possibility that the whole reforms
process might be stalled due to the government's inability to conduct
business in parliament.
Nevertheless, the key macro-economic data
points released last week is expected to keep the investors solely
focused on the apex bank's moves on a rate cut.
Investors are
hopeful of a rate-cut based on healthy macro-economic data points
including the Consumer Price Index (CPI), the Index of Industrial
Production (IIP) and the Wholesale Price Index (WPI).
The
macro-economic data points showed a fall in India's annual retail
inflation rate to 3.78 percent in July, the annual wholesale inflation
to (-) 4.05 percent, there was a rise in the factory output to 3.8
percent in June.
The WPI, coupled with the CPI, have pointed out
at a gradual reining in of prices. The RBI has set a target for CPI
inflation at 6 percent by January 2016.
"The double of joy of
growth and inflation numbers have stoked optimism for an inter-policy
rate cut, which could support banks' run in the week ahead," Anand
James, co-head, technical research desk, Geojit BNP Paribas, told IANS.
Banks
will be at the centre of the markets attention, especially in the light
of government's announcements on recapitalisation of public sector
banks and setting-up of a Banks Board Bureau.
"The announcements
by the finance ministry on the PSU banks should have positive impact on
the PSU banks' functioning over the medium to long term perspective,"
Dipen Shah, head of private client group research, Kotak Securities,
cited to IANS.
The government on August 14 announced its plans to
provide Rs.25,000 crore capital in the current and next fiscals to
banks, while Rs.20,000 crore would be provided during 2017-18 and
2018-19.
The Rs.25,000 crore this year will be provided in three tranches.
At the same time, Indian markets will be impacted by global trend in commodity prices, rupee and yuan movements.
The
yuan's surprise devaluation last week had stroked fears of competitive
devaluation across Asia, especially before the (US) Fed's monetary
policy decision due in September.
The yuan has fallen by 4.6 percent since August 11, its biggest devaluation since 1994.
The devaluation, intended to boost exports, has made investment in China cheaper, thereby leading foreign funds away from India.
This also impacted the rupee, which on August 13 fell to its lowest level against the US dollar in 24 months at Rs.65.23.
However,
relief came to the global markets when yuan rose 0.05 percent on August
14. This helped stabilised rupee which stood at Rs.64.99 against the
dollar.
"The trend in commodity prices globally, rupee movement
and the sharp bounce back on Friday seems to continue in the week
ahead," Vineeta Mahnot, equity research analyst, Hem Securities, told agency.
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Customs Exchange Rates |
Currency |
Import |
Export |
US Dollar
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66.20
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64.50 |
UK Pound
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87.50
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84.65 |
Euro
|
78.25
|
75.65 |
Japanese
Yen |
58.85 |
56.85 |
As on 13 Aug, 2022 |
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