Good recovery, can we sustain it? 13/Oct/08
The markets have staged a remarkable recovery today after a lot of talking by finance minister, RBI governor and other ministers. The Sensex closed 808.81 points up (7.68%) at 11,336.66 and Nifty closed 210.75 points up (6.43%) at 3,490.70.
Bankex staged a good comeback (after the battering last week) and was up 12.51%. Axis Bank was up 20% backed by good results, ICICI Bank was up 17% after a lot of assuaging by Mr. Kamath and reinforcement by rating agencies over the weekend.
Liquidity was better than previous week and the overnight rates came down to 10% compared to the highs of 18% seen last week. With additional government spending on anvil and the cut in CRR that has taken place, the liquidity position hopefully would be comfortable in the coming weeks.
In terms of global markets, Asia did well and Europe is also doing well and futures data point that US markets would open higher.
But in terms of a longer term recovery, it would take more time for us to see the highs that we saw in Jan/08 and there would still be some amount of pain that the global markets would go through. Indian markets are relatively better off in that sense as India’s exposure to troubled assets is not really high and the core economy would continue to grow at atleast 7%. Once the inflation animal is tamed, the central bank should start reducing rates and give a further fillip to the economy. Lets hope that that day is not very far off and in another 3 months’ time, RBI starts contemplating a rate cut.
