S&P Upgrades Ratings of Country: Market expected to be Bullish

The Equity Markets reaped benefits of a Stable Majority Government as Standard and Poor today Improved the outlook of India from Negative to Stable Today.The Impact was Immediately visible in last hour of trading as at 2:30 P.M.the markets were at 7886.15 to 7,990 High at 2:51 P.M. A Movement of 104 Points in a matter of 21 Minutes. eventually closing at 7,968.15 Points adding 57 Points to its Opening Tally.  

The BBB-/A-3' sovereign credit rating on India remains unchanged, but the outlook on India which was downgraded on 2012 from Stable to negative has been restored.The Standard Poor expects new Government under PM Narendra Modi at  to push reforms and put the Country back on high Growth Acceleration. This Outlook which is valid for next 24 Hours has lauded government on the willingness and Capacity to take the necessary steps to administer the bitter Growth Pill required to consolidate its fiscal accounts, the Report also noted the Independence of RBI, which is allowed to Continue its Inflation Control Strategy under Raghuram Rajan.

Our Observation is that it could not have come under a better time for India, as it suffers the double blow of SC Verdict on Coal Mines which has adversely affected Companies like Jindal which were Trading at 214 Points on 24th September loosing 33 Points Coming down to 181 and then making a low of 169, and other steel Companies. And the Rumors of rate Hike from Federal Bank US which eroded the FDI Confidence. 

The Government will have a task ahead of itself, as it will have to deliver on the promises or risk getting downgraded. The Campaigns like Make In India which were launched Yesterday seem just the effort in the Right Direction. What these Ratings do for Common Investors is first they take fear away from Foreign Investors who were earlier unsure of Investing in India, resulting in increased flow of Funds Secondly Borrowing Costs for Indian Companies Come Down, because of Positive Outlook. We can Expect the Market to Open on a Positive Note and Confidence of Market to Spill over in Morning Session of Trading. The Nifty is expected to make rapid gains tomorrow. 

Global Cues drag Indian Markets

Adverse Global cues with Western Markets in Europe fell flat because of Slow Growth in September, the second month running. The decline in Manufacturing sector data for Germany triggered a slow down in Wall Street,the FTSE 100 dropped 1.4 percent to 6,676 and The EURO STOXX 50 Index, Europe's leading Blue-chip index for the Eurozone, is down to 342 down 1.4 percent.

The The Dow Jones Industrial Average showed a downward trend with a drop of 0.7 per cent to 17,056 and the S&P 500 dropped 0.6 per cent to 1,983.

This is Compounded by a rapidly developing Geo-Political situation in Syria with USA -Arab Coalition Decision to go in for a strike, and Obama Decision to take the fight to ISIS

 Volatility in Indian Markets is to be expected with ending of Futures and Option Contacts on Thursday. Derivative Market is also set to have a roll over position by the end of this week. The Metal Stocks will also come under hammer if Supreme Courts fails to pay heed to Indian Government plea on 46 Operating Mines. The Order could be delivered this afternoon. The IT Stocks which enjoyed a High because of strengthening US Dollars, will not find it easy going forward, because of weakening US Markets.  

On Home Front the Positive news of Indian Launching succeeding on its maiden attempt to be placed in Mars orbit of Managlyaan, and being part of an Exclusive club of three countries for Doing So, hopefully will install a positive sense of Pride in Indian Markets. Further the wait will be for Monetary Policy of RBI to be announced on 30th which could be a sign for Investors for the Direction Markets will take in the Futures. The Market has endured a brutal correction on Tuesday and should find some support with bargain hunting Traders. As Vivek Gupta Director Research Says Trading is a Business which requires time, patience and consistent discipline. We hope you Invest in Stock which have low risk and High Return.

Modi-nomics: To Awaken the Sleeping Giant

If you were wondering what it will take for the rupee to break out from its sideway movement and for the Nifty to recover from early-2014 losses, Modi is your answer. The more it became apparent that the Gujarat Governor would become the next Prime Minister of India, the stronger the rally of Indian assets.

Interestingly, Modi has displayed a willingness to work with the other keyman of India’s cog-in-the-system: Reserve Bank of India Governor Raghuram Rajan. There were initial fears that Modi may clash with Rajan because Modi, who is pro-business, would like a weaker rupee. Rajan, however, has made it extremely clear that his top priority is to combat inflation – and the quickfire way to achieve that goal is a strong Indian currency. Modi, thankfully, has also made battling inflation his top aim – and he has made good his word, by imposing export restrictions on certain food commodities.

Speaking from the point of an economist, we would really like to see solid economic reforms from India’s new government that could potentially usher in a new era of strong emerging market growth. India is as complex as it is problematic; yet, one cannot deny the huge economic potential it possesses. Efforts to reduce government red-tape, increasing productivity, raising education standards and of course, safer laws for women will be strong steps in the right direction.

Rupee Outlook: The euphoria appears to be fading. One month ago we were pretty confident that the rupee would continue strengthening, but we were always of the opinion that the rupee has to weaken in the longer run. The rupee trended between 61 to 64 per dollar for the better part of 6 months – with no clear improvements in the Indian economy nor the US economy, the rupee should remain status quo in this range. The run of the rupee to near-58 was slightly unwarranted and the position is now unwinding.

The Nifty Index: The Nifty is at an extremely lofty height and it looks extremely toppish. Technically speaking, weekly RSI has crossed 70 for quite some time now, indicating “overbought” status while the index is starting to fall off the upper Bollinger band. This could be the start of a downtrend. However, the P/E ratio of India stocks remain relatively cheap – at 15.3, it is roughly about the same as Thailand’s. The cheap valuations of Indian stocks should give it some support. Using retracements, the Nifty is likely to find support at 7,065 and 6,872.

Who can invest in India?

India started allowing outside investments only in the 1990s. Foreign investments are categorized as: foreign direct investment (FDI) and foreign portfolio investment (FPI). All investments in which an investor takes part in the day-to-day management and operations of the company, are treated as FDI, whereas investments in shares without any control over management and operations, are treated as FPI.

For making portfolio investment in India, one should be registered either as a foreign institutional investor (FII) or as one of the sub-accounts of one of the registered FIIs. Both registrations are granted by the market regulator, SEBI. Foreign institutional investors mainly consist of mutual funds, pension funds, endowments, sovereign wealth funds, insurance companies, banks, asset management companies etc. At present, India does not allow foreign individuals to invest directly into its stock market. However, high-net-worth individuals (those with a net worth of at least $US50 million) can be registered as sub-accounts of an FII.

Foreign institutional investors and their sub accounts can invest directly into any of the stocks listed on any of the stock exchanges. Most portfolio investments consist of investment in securities in the primary and secondary markets, including shares, debentures and warrants of companies listed or to be listed on a recognized stock exchange in India. FIIs can also invest in unlisted securities outside stock exchanges, subject to approval of the price by the Reserve Bank of India. Finally, they can invest in units of mutual funds and derivatives traded on any stock exchange.

An FII registered as a debt-only FII can invest 100% of its investment into debt instruments. Other FIIs must invest a minimum of 70% of their investments in equity. The balance of 30% can be invested in debt. FIIs must use special non-resident rupee bank accounts, in order to move money in and out of India. The balances held in such an account can be fully repatriated. (For related reading, see Re-evaluating Emerging Markets. )

Will US Fed rate hike impact India?

Is India well prepared to take the impact of interest rate hike in USA? Due to signs of an upturn in economic growth, the Reserve Bank of India chief also feels that India is very well prepared and that foreign funds are less likely to desert the country. Only reason why economies like India can feel the heat if Fed raises interest rates, as it could lead to capital outflows from emerging markets.

India is in a very good state due to the action it has taken to correct its current account deficit and increase foreign exchange reserves as India was running in high current account deficits leading to a sharp depreciation in rupee last summer. However, now after the measures India has taken, probably it could be a good place where people can leave their money.

Having weathered that storm by taking by taking steps to boost currency reserves and narrow the current account gap, the rupee avoided a re-run of the crisis when the Fed actually began tapering last December. Curbs on gold imports, such as higher duties, helped dramatically narrow India's current account deficit to $32.4 billion in the fiscal year that ended in March from $87.8 billion a year earlier. India also built up its foreign exchange reserves, partly through measures that helped banks raise $34 billion in overseas loans and deposits from the Indian diaspora. India's lumbering economy grew at its fastest pace in more than two years in the quarter ending in June, and strengthening global demand should help boost exports.

Adding to the cheer, falling global crude prices have helped improve the health of public finances by drastically slashing the government's fuel subsidy bill. RBI Chief wants to reduce retail inflation to 6 percent by 2016 from near 8 percent at present, and left interest rates steady early this month, citing inflationary risks from the weak summer monsoon rains.