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An important week for India

May 11, 2009

Election results to be announced this week
After a robust performance during the previous week, Asian markets have opened this week on a mixed note. Currently, while gains are being seen in China and Hong Kong, stocks in Japan and Singapore are trading weaker. The last two months have been particularly splendid for stocks across Asia, given that the benchmark indices across several nations have surged by almost 50% (since March 9th). While indices in Singapore and Hong Kong have risen by around 53% apiece during this period, even the Indian benchmark BSE-Sensex has not been left far behind as it has clocked gains of nearly 46%.Compared to this, gains in the US and Europe have been tepid. While the US Dow Jones index has risen by 31% during this period, UK's FTSE has returned around 26%. Return of risk appetite among global investors led by a flush of liquidity release by the central banks is the key reason for the sharp movement of Asian markets during the said period. How far this rally sustains remains unknown, especially considering the fact that economies across Asia are still reeling from slowdown in exports to the US and Europe and even internal demand has slowed down considerably.

As far as the Indian markets are concerned, they seem to be factoring in a revival in demand given that a few industries have seen increased sales over the past few months. Moreover, the quarterly result season till now hasn't been as bad as was expected earlier as companies have shown improvement in margins despite some slowdown in sales. These fundamentals however, may not be the key drivers of the Indian markets over the next few weeks. The results of the General Elections will be out on coming Saturday and the kind of government that is formed subsequently, will guide the market's mood in the short term.

Worst is over, says SBI chief
The chief of India's largest banking company, SBI, believes that the worst is over for the Indian economy. Mr. O.P. Bhatt was speaking in an interview with The Economic Times. His optimism is underlined by the fact that some economic indicators have turned positive over the past few months, signifying a rebound. As he says, Indian steel production has increased, cement prices have risen and the auto and housing sectors have picked up too. In the rural segment, there was perhaps no decline in demand at all. He expects SBI to grow by 25% in FY10, both on the deposit mobilization and lending fronts.

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