The only predictable feature of stock market is its unpredictability. Demonetization in November got everyone worried .The move was expected to slow down economic growth considerably and affect every sector of economy including stock market. Since the move was unexpected and the scale unprecedented, no one really knew what was going to happen.
Nobody saw anything positive for the stock market.
Worries of demonetization vanished into thin air and stock market started booming soon after. Index gained 19 percent in three months from December last week and has crossed 30000 mark this week.
In a booming market it is all positive news. BJP’s victory in the recent assembly polls is significant. This in turn strengthened central government. Political stability is what economy needs. And it is good news for the market. This is how the stock market look at this.
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Positive macroeconomic numbers came next. Contraction in current account deficit and the resultant inflow of domestic and foreign funds into Indian equities was good news. The market is expected to continue its bullish trends provided the macro economic numbers continue to be strong.
Passage of GST Bill in both houses of parliament is major achievement. Political mileage apart, this is a welcome development which will help our economy. Again, positive for commerce, industry and stock market.
The Nikkei Manufacturing PMI in India rose to 52.5 in March of 2017 from 50.7 in a month earlier. It was the third straight month of expansion and the highest reading since October 2016, as output and new orders increased the most in five months amid improving business confidence while new export orders and buying levels accelerated solidly. The Nikkei India Manufacturing Purchasing Managers’ Index measures the performance of the manufacturing sector and is derived from a survey of 500 manufacturing companies.
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Trends in global markets also contributed. Stock markets in Asia and US moved up in recent days. There are developments like US missile strike on Syria for which impact on the global markets are not known. Indian market discounted the uncertainty part in the international market and has taken only the positive side.
RBI in its latest policy announcement did not cut interest rate. RBI seems to be concerned about inflation. Surging inflation is not good for a bull market. Current account and fiscal deficit numbers may also act as villains if they go beyond the stipulated level.
Project implementation in all sector are at snails phase, complains project managers. Reasons given out are not uniform. It varies from political to policy to bureaucratic to infrastructure issues. Whichever way, not good news for stock market.
For foreign funds, this is good time to book profit. Market is up and profits are there. In addition strengthening Indian rupee means good time to book profit and take money out to the country of origin.
What goes up fast can come down faster. Around 19 percent growth in three months is fast. This worry is there already in the market. Another equally important question is if this rate is sustainable.
