Mkts likely to see small rallies
The Indian stock markets continued to dance to the tunes played by the Indian rupee. When the value of the rupee declined to an all-time low of 68.86...
It’s better small investors stay away from markets until clear picture emerges
The trend caught in the last two days of last week might percolate into the new week also and take the stock prices further up but a long lasting run up cannot be expected
The Indian stock markets continued to dance to the tunes played by the Indian rupee. When the value of the rupee declined to an all-time low of 68.86 to a dollar, the markets suffered a huge jerk. However, as the Indian currency regained a small ground in the later half, the markets also jumped up from the week's lowest level and closed up by 100 points than the previous week's closing. It was not only the falling rupee that drove the investors away from the stock markets, but the fears of strikes on Syria by the USA and others had also done their bit.
Besides, Parliament’s nod for the Food Security Bill added fuel to the fire as the move is expected to increase subsidy burden on the exchequer which is already facing uncontrollable fiscal deficit. The scared FIIs continued to off-load the Indian company stocks, aggravating the fall in the rupee value against most of the leading world currencies.
However, when the dollar became unaffordable, the Indian currency began regaining some of its lost glory. Measures by Reserve Bank also helped the rupee. The entire government machinery stood on its heels last week when the rupee's downhill journey was on. The helplessness in arresting the downward spiral of the rupee in the first half of the week also prompted blame-game between the present and the ex-finance ministers and also between the finance minister and the Reserve Bank Governor.
The opposition parties demanded that the Prime Minister Dr Manmohan Singh must speak on the issue of rupee depreciation and economic slowdown. Though the Prime Minister came forward with a statement on Friday, his talk failed to impress markets. However, fresh buying by the operators helped the markets not only to come out of the rut, but also surface above the pre vious day's and the previous week's closings as Friday was the first day of September series of futures and options contracts. The bulls who had lost heavily in August series were lured by low levels of stock prices to enter in to fresh long positions on the first day of the new series.
In the meantime, the GDP numbers announced on Friday evening indicated that the growth in the first quarter of the current fiscal at 4.4 per cent was the slowest in the past four years. Almost all the industry segments were reported to have suffered setback due to high interest costs, high input costs, demand recession, fall in the rupee value and other factors like high inflation.
While speaking on the subject of the fall in the rupee value, the Prime Minister failed to convince the validity of his reasoning for the fall but tried to convince that depreciation of the rupee was good so far as India's exports were concerned. He also assured the House that his government would hasten reforms and help the economy to come out of the recession.
However, it was not based on the Prime Minister's assurances that the markets ruled firm in the last couple of days but it was the likely end of the worst phase in both the rupee as well as the stock markets that made the markets go up and close higher than the previous week. The trend caught in the last couple of days might percolate into the new week also and take the stock prices further up but a long lasting run up cannot be expected as there are innumerable hurdles and obstacles on their path. It could therefore be only small rallies that might be seen in the next week which can be utilized for short-term speculative trading. However, speculative trading suits only to highly trained market operators and most others become only the prey to these money eaters, and therefore, it would be in their own interest if the small investors stayed away from the markets unless and until clear picture emerges.