STOCK MARKET

POSITIVE FACRTORS IN THE MARKET
1) biggest factor is liquidity. There seems to be quite a bit of
liquidity in the market which is keeping it from falling and pushing
it higher.
2) Much better than expected Q1 results. The early results show an
encouraging trend. India Inc. has done a much better job in managing
their finances, especially costs. Let’s see if this trend continues for
the remaining companies.
3) A re-rating on the valuations looks likely. It seems the market is
betting on this.
4) Expectations of a big push on reforms and disinvestment. Let’s hope
the government delivers on this.
5) Moderate crude prices.
6) Benign interest rates for the time being.
7) India being a primarily a domestic consumption story, there is a
feeling that it should be de-coupled from developed markets.

NEGITIVE FACTORS IN THE MARKET
1) Valuation is quiet rich. Sensex is at more than 18 times trailing
12m earnings.
2) The bounce of almost 85% from lows has been quiet rapid.
Individually many stocks have tripled or more. Any big correction can
be violent.
3) Interest rates though currently are probably going to inch upwards
in the second half.
4) Possible downgrade of the country due to HIGH FISCAL DEFICIT in the
near future.
5) US and Europe downturn to continue for a prolonged time (maybe well
into 2010). US unemployment rate expected to cross 11% (which is
probably as high as the Great Economic Depression of 1930s) in 2010.
6) The government is burdened by huge expectation on reforms and
disinvestment. Any slippage on this front will be a big negative.
7) Government and PSU borrowing to suck out a lot of liquidity from
the markets. Will India Inc. be left with left with enough liquidity
for their capex programs. A rough calculation leads to a shortfall of
Rs. 70000-80000 crore for India Inc. ECB norms need to be relaxed for
bridging this shortfall.
8) Effect of India signing global emission norms on Indian industry to
be evaluated.
9) Deficient MONSOON can really spook the market. This needs to be
closely watched.
10) Is Adani Power IPO a pointer to market peaking out for the near
term a la Reliance Power IPO? On the face of it the IPO looks
expensive, though not as stretched as Reliance Power IPO.