Market wishlist: Stable govt, improved CAD, sustained FII inflows

A stable govt at the Centre, improved CAD, sustained FII inflows and better policy decisions are some of the wishes that stock markets hope will come true in 2014.

PTI| Updated: Jan 01, 2014, 13:14 PM IST

New Delhi: A stable government at the Centre, improved current account deficit, sustained foreign fund inflows, positive global cues and better policy decisions are some of the wishes that stock markets hope will come true in 2014.

Driven by robust overseas investment and election euphoria, stock markets scaled new peaks in 2013, with the benchmark Sensex reaping a gain of nearly 9 percent.

Marketmen say that robust FII inflows and hopes of wider reforms after upcoming Lok Sabha elections helped overcome concerns over slowing economic growth and high inflation, and even better days are expected in 2014.

"Stable government, improved CAD, and better policy decisions are the wish-list of the stock market for the year 2014," said Rahul Shah, Vice President, Group Leader-Equity Advisory Group, Motilal Oswal Securities.

Analysts said the biggest event of the new year will undoubtedly be the general elections.

"There is an expectation of a change of government at the Centre and if it does transpire that a Narendra Modi-led BJP government comes to power, markets would surely move up.

"Even if a BJP-led coalition does not come to power and a Congress-led coalition comes to power, markets are unlikely to fall, due to expectations of pending reforms to be taken up by the new government," Shah said.

According to Raghu Kumar, Co-founder of brokerage firm RKSV, "Stock market wants to see a big rebound due to it being an election year. Sector wise, retail sector would want to see a big jump, hopefully with more foreign retail investments with liberated FDI laws.

"Over the last two years, we have witnessed low consumption and economic growth. GDP can be jump-started with a push in the retail sector."

On expectations from general elections, Kumar said: "It is too early to predict and there will be a lot of uncertainty leading up to the elections. At the same time, investor participation will pick up prior to and post elections.

"This would be good for the equity markets, since 2013 saw a drop in retail equity participation."

Experts say markets in the first half of 2014 will see high volatility owing to political events and the second half will be driven by the outcome of elections.

Apart from general elections, other major trigger for the domestic equities includes tapering of the liquidity policy by the US Federal Reserve.

The Federal Reserve, which had hinted at trimming its monthly USD 85 billion stimulus back in May, finally announced a USD 10 billion cut, giving time for the Indian market to stabilise.