Do markets recovered?

The current fluctuating Sensex and Nifty make us to think that the markets really recovered or not. I take up this with an analysis of some current policies and events in the country.

The recent hike of 25bpts in policy rates by RBI in its annual policy shows that curbing inflation is the necessary step at this moment. But why RBI has increased only 25bpts when the industry is expecting more than 50bpts raise which I am not clear, but I think there will be a midpolicy review in the rates again by RBI to curb inflation. The benchmark rates change by RBI has worked out with the wpi inflation has declined from 9.99% to 9.59% on april.

The government's borrowing program for FY11 is planned around $64 billion dollars mainly to reduce the fiscal deficit from 6.5% to 5.5% of gdp. I hope this fiscal policy will also help to reduce the inflation. But how far these inflationary & deficit policy measures will not affect the planned growth of 8% is a question.Next,the recent Greece debt and PIIGS weak economy may affect the indian market sentiment initially with some FII capital moving out but overall the our market stands resilient to this.

And beneficially sales of both commercial and consumer vehicles has increased across the country.With the automobile sector sales revived upto 39% in the month of april alone and the industrial index of production increase of 13.5% shows that the manufacturing sector has recovered and will pass on the same demand to other sectors also.

Q4 FY10 results of most of the Banks, Manufacturing and IT companies also shows a good positive sign in terms of net profit . Also most of the banks hope that their lending will grow by more than 20% on an average YOY, which provides credit to the business/households and thus stimulates the growth momentum. Above all the hopes of south-west monsoon during midjuly need to be met to prevent the food inflation which was a major curse last year. The government will ultimately need to work on to increase the supply rather RBI working on the monetary side by reducing demand/moneyflow.

Currently the stocks of telecom sector facing a downside mainly because of the 3G auction will soon take up once auction is over and 3G services are started.

All this shows a positive signal towards the recovery, more of it we will watch out with optimism....