Nifty created panic in investors minds by falling rapidly almost 10% in two months in September and October. Various reasons attributed to this are fear of ruling NDA losing state elections badly, farm loan waiver by the newly elected state governments, slow down in world growth rate, US-Sino trade war, rising borrowing costs in the US due to rising interest rates etc. FIIs heavily trimmed their positions during this period. Indian rupee also lost value considerably in the months of October and November.
WTI Crude prices after reaching a peak of about 75$ in the first week of October slid heavily to 43$ in last week of December. This fall in crude prices laid the base for recovery in Indian equity markets as India's crude import bill is heavy. Rupee also recovered in December some of its lost value. Consumer inflation fell to the lowest level in November well below the comfort level of RBI generating a hope that interest rates will be lowered in future. As per reports, US-Sino trade talks are progressing positively and US Fed chairman Powell assured that central bank is concerned about the fears of financial markets. GST rates on many items are slashed. All these developments further improved the sentiment.
The resignation of RBI governor Urjit Patel and the defeat of BJP in 3 state elections did not cause the expected dent in the markets. As there was not much reduction in the percentage of votes polled in these elections for BJP, markets are still hopeful of NDA victory in general elections. Though there are not many hopes on third-quarter results which are in motion, markets are expecting some friendly measures in the forthcoming interim budget in February. Considering these factors Nifty is likely to continue the upward movement slowly but bouts of volatility in short term cannot be ruled out.
Disclaimer: Analysis and expectations are based on known knows. Known unknowns and unknown unknowns may cause disruptions
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