July bullish month for mkts

The Indian stock markets continued to slip further in the last week as concerns of a further flare up in inflation in the wake of a spike in the world crude oil prices weighed more than the likely reformist union budget slated to be presented on July 11, by the new government.

The so-called civil war in Iraq reached its peak when terrorists who had taken over a few cities and towns were reported to have seized the biggest oil refinery in Iraq. This made the world's leading stock markets tumble and the Indian ones being more vulnerable to such events, faced all-round selling pressure in the wake of likely flare up in inflation led by onion and fresh vegetables owing to scanty or no rains.

The BSE Sensex which had reached its life-time high of 25725 in the beginning of the previous week and then entered in a reversal mode to have closed into negative territory, entered the new week under review, with highly cautious mood as the events in Iraq were reported to be getting more and more serious with extremist groups seizing more and more towns and cities and reportedly on killing spree.

Indian markets, in line with global peers, received the sharpest jitters of the recent times (Iraq oil refinery attack), the impact of which continued to prevail even after the Iraq government said it has recaptured the nation's biggest Baijee refinery from the terrorists because by that time a more India specific bad news that nearly 40 Indian workers employed in Mosul, a town of Iraq, 0have been abducted, hit the markets hard.

Such disturbing events continued to discourage potential equity investors from buying even at decreased prices. Whereas both the domestic and foreign investors are of a view to re-entering the markets that would see the prices going further down in the wake of presentation of the Union budget and later on commencement of the new corporate earnings season.

It was due to this very reason that though the BSE Sensex lost only marginally with a net weekly loss being just 122 points, the tally-sheet showed huge and wide-spread damages at the end of the week. The BSE Sensex on Friday plunged to a low which was just a few points above the psychological round-figure of 25000-mark.
It was after the market hours on Friday that the Indian railways announced steep hikes of 14.2 percent in passenger fares and 6.5 percent in freight rates. Thus, the Modi-government which had already hinted at harsh decisions for mending the economy has started acting in that direction even a few days before the railway and union budget announcements. The hikes in fares and freights have been obviously severely criticised by the rivals and opposition leaders but have been welcomed by industry and economists.

The hike in fares and freights also indicates that the ensuing union budget would also have tough measures that are required to put the economy back on track. The impact of the railway hikes is most likely to be positive at least in the initial trades in the new week opening today.

In the meantime, the Iraq Government is also reported to have made preparation to retaliate the terrorists' aggression especially after the US denied its active re-engagement in Iraq. This might cool down the overheated crude oil market in the new week and help the Indian stock markets stabilize ahead of the June expiry. Further, the monsoon is also expected to have started pouring in over the entire country.

From July second week onwards, the new corporate number season for the first quarter of the current fiscal is going to start and if judged by the encouraging advance tax payments as made by the leading companies, the same is going to be positive for the stock markets. July is considered to be seasonally a bullish month for the Indian stock markets and it might remain so this time also. Therefore, investors are suggested to not lose heart and courage if the prices of shares go further down but be enterprising to pick up dividend paying and progressive company stocks at dips.