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Reshuffle and tremors in Indian economy



The Pharma and FMCG are back in vogue as the usual rally in cyclical companies and it was more of sentiments driven than improvement in business of the companies. During the past few months the companies in the cyclical sectors such as infrastructures, capital goods and banking sector attracted more of investors interest .During this rally the stocks in cyclical sectors have moved beyond their intrinsic values , and the investors have not sold off all their positions as naturally there is some focus on the defensive stocks too.   The pharma is doing better than the FMCG sector ,the ore companies have been bearish as its demand was reduced from China , however the commodity companies have significantly rallied in this bull run .

By next Wednesday the meeting of US Federal  Reserve will decide the raise in the interest rates , the Indian investor are anxious and so also are the FIIs who have showed signs of slowing down , and the point of concern here is that the decision to increase rates in  the US would definitely trigger off an avalanche of sell off in those emerging markets with high  current account deficit (CAD).This forced sell-off caused by the Federal worries in these steep stock market valuation may offer a buying opportunities. This Tuesday the FIIs sold shares net worth of Rs 830 crores thereby pulling down sensex by 324 points or 1.2% ,small caps and mid cap took the major brunt with their indices dropping to the tune of 4%.
Just to meet the analyst, investors and the market expectations   the RBI has decided in its third bi-monthly monetary policy to keep the policy rates unchanged neither did RBI relax the policy because of the upside risk inflation is bound to be there till the year end .RBI freed Rs 40,00 crores for lending by reducing statutory liquidity ratio and even the bank investment limit was lowered in held to maturity (HTM) category of bonds from 24.5% to 24% .

FDIs grew by 138% this may , mostly the telecom sector , drugs pharma and service sector were the ones which attracted the FDIs the most along with buyers of equity and debt markets .There is expansion in credit and growth rates .Industrial production has geared up to 3.5% with expansions in all the sectors .

Although the markets have reacted sharply in anticipation to the federal increasing the rates but until the economy recovery does not gets back to the track in the top gear they will have to keep the rates low , because a stronger dollar will hold back the FIIs into making fresh investments .