Aug 25, 2001|
Trading this week was similar compared to the trend over the past month. The markets continue their sideways movement, as investors prefer not to take any bets. The deteriorating global and domestic economic environment does make it difficult for a convincing investment argument.
Further, the lack of any macro drivers has reduced the visibility on market direction. This has added to the apprehension in the minds of investors. The economic indicators fail to instill a sense of confidence. The Index of industrial production (IIP) growth for the first two months of the current fiscal has slipped to 2.6% compared to 6.2% in the same period of the previous year. More importantly, there has been a deceleration month on month. IIP growth for May '01 was 1.9% compared to 3.3% in April '01.
Brakes on the economy were largely felt in 4QFY01, as IIP growth plummeted from above 5% in the first three quarters of FY01 to 2.8% in the last quarter. This number, however, is still higher than the aggregate growth recorded in the first two months of FY02. Consequently, this could indicate that the economy continues to search for a bottom. This being the case the outlook, primarily for old economy, in the near term, continues to remain bleak.
Adding to the ambiguity is the turmoil at the centre. The Government has been fighting some rough weather, ever since the start of the new fiscal, with the opening of Pandora's box. Although the incumbent has initiated fire fighting measures (cabinet clearing the Lok Pal and insolvency bill) the market is likely to remain jittery with the drama unfolding at North Block.
External forces too have failed to lift sentiment at home. With the global slowdown led by the U.S and the continuing tech meltdown the NASDAQ has not brought any cheer. In fact, the tech laden benchmark index has fallen 7.3% over the past month while the Sensex has decline by a marginal 0.7% over the same period. Market watchers, who earlier were expecting a turnaround in the second half of '01, have pushed forward their prognosis of improved fortunes to the first quarter of '02. Consequently, external drivers could prove to be elusive.
On the domestic side, one may need to look out for agriculture growth numbers. The Centre for Monitoring the Indian Economy (CMIE) has projected agriculture volume growth at 9% for FY02, which translates into a produce of 213.7 MT. This is likely to contribute 1.8% to GDP growth. Also, one may need to look out for the IIP numbers to determine any revival in the economy. Sentiment will also be driven by the speed of the disinvestment programme. Passing of the new bills by both the houses and stability at the centre could also act as triggers.
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