Uptrend likely to continue

The Indian stock markets, which declined in the first three weeks of the Vikram Samvat 2070, especially after the US's stimulus tapering fears surfaced, were back on growth track with 575 points upswing last week. The markets reversed their trend in the last week on the news that the leading world powers have decided to lift trade sanctions that were imposed on Iran about 30 years ago, after Iran agreed to temporarily freeze its nuclear programme. The deal done between Iran and six world powers including the US envisages that Iran would curb its nuclear activities for six months in exchange for limited and gradual sanction relief.

This had not only helped the Indian stock markets from getting freed from the fears of the likely US tapering but also triggered a universal upmove. Indian stock markets went up more than others mainly because the Iran treaty would ease a lot of forex outgo burden on India as it is the second largest supplier of crude oil to India and also accepts payments in currencies other than the dollar. Post the deal, the world oil markets eased and the Indian currency gained, though a tad, that resulted in a flare up in the global stock markets and the Indian markets as well.

The BSE Sensex that rose 388 points on Monday was down 180 points on Tuesday. On Wednesday, however, the pace of the markets going down declined to only five points that indicated that the undertone was still an upbeat one. On Thursday, the last day for the monthly contracts for derivatives trades, the benchmark index jumped up by 114 points as bear operators preferred to cover their short positions in November series rather than rolling over to the new, December series.

And, Friday being the first day of December series, more buyers ventured to build up fresh long positions as they had been expecting a better GDP number to be announced later that day. The Sensex on Friday gained as many as 245 points. The total gain attained by the market barometer stood at a whopping 574.54 points.

The markets are most likely to adhere to their uptrend also in the new week as the GDP numbers for the July-September quarter have picked up at 4.8 per cent. As a result of a good monsoon, prices of essential commodities are expected to ease and prompt the banking regular, the RBI, not to raise interest rate when it reviews monetary policy in December. The exports from India have been consistently rising, though, at a slower pace. This has helped in sustained improvement in the levels of forex kitty. The increased forex kitty and prospects of cheaper crude oil imports from Iran, may help the markets to go further up in the new week that would be the last one before five state assembly results would be out.

Baffled by increased scope of the BJP and allies winning the next Lok Sabha polls, the UPA government has become desperate to implement growth plans. This was evident from the speech of Finance Minister P Chidambaram on Friday at an industry meet. He laid out the government's programme to put the Indian economy back on high growth track ahead of next year's general elections with a series of measures that include liberalising the capital market and the financial sector, setting appropriate gas and oil prices, resolving coal supply shortages and freeing up infrastructure projects that are stuck through the Cabinet Committee on Investment. It is therefore, either Congress or the BJP at the centre after general elections, the markets are destined to go up and reach a new high.

The US economy is slowly but steadily improving. Its most popular stock market barometer, the Dow Jones Industrial Average, has already reached an all-time high of 16,000 points. The Japanese index, Nikkei, has also steadily improved to the last 20 years' peak last week. So were the markets in Spain and other countries.

Thus, the world economies are showing signs of improvement and may spark universal buoyancy in over next six to eight months, the positive impacts of which would be felt much in advance, may be in this December itself when the markets might get a bullish trigger from five state assembly results.

Thus the longer term prospective for the Indian stock markets have improved and a possible run up in the week after the assembly poll results are out on December 8, might take the prices of equities much up from the present levels. The possibility being so positive makes one to recommend buying of good and blue chip stocks for long-term investing and midcap and low-ranking ones for trading for short-term gains.