What next for the Capital market?

It’s been 12 months from I’ve written my last post and since then, Sensex has touched to 13 P/E and now it’s been trading at around 17 P/E against the other emerging market indices of around 14 P/E making it an expensive basket for the Global Investors. 

There are some of the factors, which led Indian market to perform best against the other Indices. Some of them are:

– Rise in Government yield (Short term yield is more than long term yield now, hence FIIs are exhausted with their T-bill limit now days)

– Rupee appreciation – (This will lead FII’s to get more dollar return in addition to the benchmark return)

– Anticipation of new political party (Namo – Narendra Modi)

– Low current account deficit

– GDP growth almost reached  to the budgeted figure of 4.8%

We have already seen dollar inflow of around 6 billion into the debt market from the start of 2014 and this trend will continue till the new government forms. There are many factors associated with the new government formation. If new government and likely Narendra modi comes as PM candidate, we can see major infrastructure projects to come into live again, which is indirectly or directly attached with some of the sectors like Financial services, Metal, Cement etc. and hence, one sector will lead other sectors to perform better in the future. Therefore we have seen rally in those sectors just few days back because market discounts all such factors in advance.

We can see more employment into the Infrastructure sector and hence, more demand for the consumer durables and non-durables can also be seen in the future, which will led FMCG to perform good. All these factors will led rupee to get stronger against the dollar and hence, export driven industries like IT and Pharma will not be the shining star in FY15 as was seen in FY14.