Markets hit all-time high

The Nifty opened on a positive note led by gains in L&T, SesaBSE 0.31 % Sterlite and M&M and hit fresh all-time high on the back of sustained FII inflows. According to dealers, the trade may turn choppy as the session progresses as traders would be squaring off open positions ahead of April series expiry


Deloitte View


"On the 23rd of April, the BSE Sensex and Nifty hit record highs for a third session in a row showing optimism in the markets. While investors remained net buyers, this spurt in performance begged the question whether this is a short term phenomenon or it demonstrates a turnaround in the economy. Over the past few months, we have seen markets perform relatively well though economic reality has not lived up to expectations. GDP for Q4 is likely to close around 5%, manufacturing growth is clearly lagging behind while agricultural growth continues to rely on the monsoon. Though positive export movements has resulted in a reduction of the current account deficit, longer trade prospects still look moderate.

It seems that there is an expectation lag in market performance and the current run is due to twin effects. The markets may be bullish not because of how things are but because of where the economy may be in the future. In this regard, elections hold the key. There is an expectation that a new government if formed with a clear mandate will take reforms forward, cut down on corruption and revive growth prospects of the economy. Secondly, FII inflows have been good this current quarter. The BSE sensex has been the second best performer among developing countries' stock indices since January 1, gaining 10.2% in dollar terms.

The future however may be different. FII flows have come down in April. As per Bloomberg, India has received $650 million, the lowest among these emerging markets. If the elections result in a coalition scenario, it is going to be difficult for the new government to drive any meaningful reforms forward. Consequently, markets are likely to suffer. Only time will tell which of these scenarios turn to reality..”