Last week, after a poor start, the BSE Sensex recouped all its early losses to end at 19,915.95 points - a modest gain of 189 points or one per cent over the previous week's closing. The main reason was the renewed interest in the Indian market following the US's partial shutdown, after the two houses of the US Congress failed to agree on a new budget.
The shutdown suggested that the tapering off of quantitative easing - which all emerging markets have been dreading - already deferred would be postponed still further by the US Federal Reserve. Foreign institutional investors (FIIs) pumped close to Rs 1,100 crore into Indian markets between Monday and Friday. The US shutdown also weakened the dollar, thus helping the rupee to close at a seven-week high of 61.44 against it, gaining almost two per cent. In the short-term, a weak US economy augurs well for India as it means quantitative easing will continue and so will the FII flows into the country.
On Saturday came another positive development - the Securities Exchange Board of India (SEBI) simplified norms for foreign investors. From now on, for instance, foreign portfolio investors (FPI) can directly invest in India without prior approval from SEBI.
This week the Index of Industrial Production (IIP) figures for the month of August will be announced, and it will be a key event to watch out for. Market expectation is that the manufacturing sector could throw up some surprises. The IIP had risen by 2.6 per cent in July. Similarly, expectations are building up for the September end quarterly results. Infosys's September end results are expected on Friday. The general view is that the companies whose stocks form part of the Sensex will see profits rise in the range of five to eight per cent, with revenue growing between 10.5 to 12 per cent.
No run of any kind should be expected. The market will move in a narrow range. In a recent survey of fund managers by Business Today, 46 per cent said they expected the Sensex to hover between 18,000 and 20,000 over the next one year. Sentiment is not bullish, but neither is it negative. Even as it stays range bound, the Sensex will also exhibit volatility. The Indian market does not mirror the current state of economy. It will advance purely depending on the money that flows in. Little change can be expected in the economy for the next 18 months or so till the general elections are over and the new government has settled in. However, this is an opportunity to build a strong portfolio.