Fix macro problems first

The market in the short to medium-term is likely to witness some rallies. However, these may be short-lived since the excitement over anything like easing liquidity or diminishing Euro problems may die soon due to counter-balancing forces such as deleveraging, austerity measures and so on. 

The negative sentiment will only disappear if we see moves by the government like opening up of foreign direct investment (FDI) in retail or land acquisition or other measures that may restore confidence and change sentiments. In that case, we will see foreign institutional investment (FII) inflows improve, the rupee strengthening and corporate profits becoming healthier. 

However, the rally may still not sustain because India, unlike other emerging markets, has some macro problems that are difficult to fix and it is a market that is still trading at a considerable premium. Also, such moves might have to wait till the Presidential and Vice Presidential elections are over, the new incumbent in the Finance Ministry settles down and whether the emerging political equations provide room to the ruling coalition to push through key reforms......READMORE