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Stock Markets and Financial Markets Update
Stock prices put on a rally in the last fortnight, due to an easing in crude prices. On concerns of a slowdown in global economic activity crude prices have declined within the USD 110 per barrel mark to close on Friday, 5th Sept. at USD 106. With the current supply being adequate, it is expected that crude would stabilize at the current levels or lower.
The inflation number declined over two consecutive weeks at 12.40 per cent for the week ended August 16 and 12.34 per cent for the week ended August 23. Inflation might continue to be moderate for the coming two or three weeks, after which we might once again see a spurt on account of the base effect. Inflation might then touch 12.5 -13.0 per cent levels. The strengthening US dollar against the Rupee resulting into higher import costs could add to inflationary pressure.
The outcome of the meeting of the Nuclear Suppliers’ Group has been positive for India. An additional 40,000 mega watts would be added to India’s power supply over the next 12 years which would ease pressure on the country’s existing power resources. Engineering and capital goods industries are seen to be major beneficiaries from the development.
The current valuation of the market at 14 to 15 times one year forward earnings looks fair. We are witnessing some amount of slow down in corporate earnings growth which could be attributed to the relatively hawkish stand of the RBI. Recent monetary policy decisions of the RBI to curb inflation are hurting growth. But once inflation comes under control, the economic growth could be revived. A 15 to 17 per cent earnings growth in FY10 would be adequate and reasonable. In the near term, the market is expected to range bound. The Sensex could be confined in the range of 14500 and 16500. The forthcoming season of quarterly results would be influential in determining further direction of the market |
