gfiles magazine

September 4, 2014

In the midst of a bull run

dr gs sood

The market has hit a new high, riding on improved fundamentals of the economy and improving geopolitical environment. India is far less fragile now than was perceived a year back with declining current account deficit and improving foreign exchange reserves coupled with a stable rupee. Short-term external debt as percentage of reserves has declined considerably and fiscal pressure in terms of twin deficits—current as well as fiscal deficit—has vastly reduced with consumer price inflation cooling down and the Reserve Bank may think of a rate cut sooner than most market participants expect. Imports and exports both have picked up, indicating an economic recovery confirmed by industrial production rising to a 19-month high of 4.7 per cent and services activity rising to a 17-month high. Declining crude oil prices due to receding tension and better-than-expected Chinese data has further aided sentiment.

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