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Range bound sentiment - Views on News from Equitymaster
 
 
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  • Aug 11, 2001

    Range bound sentiment

    The Indian bourses declined a shade, to close at more or less the previous week’s levels. The bourses continue to juggle with the monsoon positives and the long list of negatives. That’s why the bourses continue to be range bound. The question that seems to be on the investors mind: Is the worst over?

    Though the good monsoon report has seen investors buy into auto, FMCG and cement, the rise doesn’t seem to hold. The dilemma of the investor community is understandable. On the one hand, economic bodies like the CMIE seem quite bullish of an economic recovery backed by agricultural growth. On the other, investors have to contend with present news such as, the industrial growth has slipped to 2.1% in the first quarter of FY02 (from 6.1% in 1QFY01).

    Investors globally seem to be caught in this flux. The economies continue to be sluggish. The interest rate cuts, both in the US and India, have yet to show effect. Infact, the Dow rallied last night in anticipation that the US Fed may go in another round of rate cuts. However, our very own RBI is not in favour of another rate cut just yet. But the RBI has surprised the markets twice already and may not hesitate to do so again in order to give a fillip to the economy.

    The government continues to do its bit. The Rs 350 bn ‘Golden Quadrilateral’ road project has been approved. If implemented as planned the project should give a fillip to infrastructure development in the country. The lack on investments has been the key reason for the Hindu rate growth in the last four years. This substantial investment directly as well as indirectly could boost employment and consumption, which have been languishing for some time now. However, UTI’s and IFCI’s continue to put holes in the government’s pockets, thereby restricting its planned expenditure programmes. The hiccups in the disinvestment process also haven’t helped the government’s cause.

    All said and done, only when the interest rate cuts and the monsoons begin to filter down to increased demand, the bourses may see some sustainable positive movement. Until then, the pessimism may well continue to cast a shadow.

     

     

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