The Economy Scenario and equity debt markets behavior going forward …
We all will appreciate that economies world over are supporting their respective debt market in these unprecedented times and many including America are printing currencies. Thankfully India is not printing money but has ways out to manage and support economy through wide variety of innovative financing measures available to raise money for projects and also monetization. MOU’s open market operation is one of these.
Most countries like India are also facing inflationary pressure (which is actually due to short supply & not demand push inflation hence unproductive) which is expected to ease going forward. Higher crude prices, is one of the reasons for inflation. However, OPEC has recently announced to increase crude oil production (which they had reduced with the start of pandemic to maintain the oil prices even in the low demand scenario) and reduce the prices by 4$ per barrel. This will certainly ease out some pressure on the Central Bank while having check on interest rates.
Going forward, lower interest rates scenario looks imminent or in other words soft considering the Govt. scope of even stretching itself in terms of fiscal deficit (which is 6.80% as defined in budget) and as rightly being suggested by prominent economist including Mr. K.V. Kamath (veteran Banker). Mr. Kamath is also of the opinion that benign interest rates of 8% and abundant liquidity were also necessary to seize what he called as a 25 year growth runaway opportunity awaiting the country.
Considering the outcome of above scenario, interest rates will be on lower side and funds will be easily available making private player interested in projects and its executions. On the other side being lesser interest offered on the Bank Fixed deposits and availability of ample liquidity will help in sustaining the equity momentum for at least six to eight months.