Mumbai: Snapping its two-day losing run, the Sensex soared 348.32 points up at 25,022.16, while the Nifty closed at a robust 7,671.40 up 116.20 points. “It’s the El Nino effect,” said Ambaresh Baliga, senior stock market analyst. “Because after two bad monsoons, historically we have to have a good monsoon as the El Nino effect recedes.”
A good monsoon will reduce food inflation and put more purchasing power in the hands of rural India thus increasing demand. Vinod Nair head, research, Geojit BNP Paribas Financial Services Ltd, sees the sentiment as “largely positive.”
He said that it is difficult to say how exactly the monsoon plays out but if it’s a good monsoon, it would lower the impact on the consumer price index (CPI) as the food inflation would be down and the GDP should improve.
Mr Baliga also says the Sensex would do well if US Federal Reserve goes slow on the proposed increase in its interest rate. “My expectation is that the US Fed will not hike interest rates soon; Since India is the sweet spot globally, FII inflows to India which started in March will continue in April.”
“Domestic mutual funds which had withdrawn as the markets were not doing well in the last three to four months have been pouring in money in the last one and half months,” he added.
One of the biggest factors in the coming months, he said is that investors will have to come to equity markets as FD rates too are coming down and could touch 6 per cent next year.
Sudip Bandyopadhyay , the promoter of Indi-Trade, sees “a one per cent improvement in GDP,” if there is a good monsoon as it would push up rural demand and inc-rease demands of FMCG goods, consumer durables and two wheelers.
Madan Sabnavis of Care Ratings says that the economy in 2016-17 will see GDP growth improve to 7.8 per cent iin FY 17, an increase in growth from 1.1 per cent in FY16 to 3 per cent in FY17 in agriculture, IIP growth to between 4-5 per cent and gross fixed capital formation to increase marginally to 30.5-31 per cent and consumer price index inflation to be in the range of 5-5.5 per cent.
