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Stock market hopes for rate cuts, more reforms in 2013

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New Delhi:

Implementations of key reforms, cut in interest rates, overhaul of tax regime and a stable global economy are some of the wishes that Dalal Street expects to come true in the New Year beginning tomorrow.

Despite volatile moves, the year 2012 has finally proved to be fruitful for the stock market with about 25 per cent appreciation in benchmark indices, but investors are looking forward to more stable times in 2013.

The wish list includes favourable policy initiatives by the government and regulators like RBI and Sebi, in addition to the implementation of already proposed reforms, as also a better corporate earnings performance in 2013 to keep up the momentum, experts say.

"RBI's monetary policy looks as the biggest trigger for the Indian stock market in 2013. Going ahead, implementation of the proposed direct cash transfer, if happens on the desired lines, would lift investor sentiment. Also, the much-awaited GST could be a game-changer for the markets," Aditya Trading Solutions managing director Vikas Jain said.

Indian investors, craving for rate cuts, would also like to see inflation slowing, he added.

The central bank had hiked key policy rates 13 times by 3.75 per cent between March 2010 and October 2011 to tame rising inflation.

The RBI has, however, indicated that in view of the likelihood of inflation moderating further, it could go in for a rate cut in its third quarter policy review in January. Besides, market participants also wish that government continues its reforms' measures and presents a realistic and reformist budget.

The gain of over 25 per cent in Sensex in 2012 so far, has infused life back into the markets. However, going ahead, the rally will be driven by corporate earnings, fiscal deficit and inflation-level, Jain said.

According to Vinay Khattar, Head Research (Individual Clients), Edelweiss Financial Services: "The first and foremost wish is from the RBI. Markets are expecting the central bank to cut repo rate in the fourth quarter of FY13.”

"The second wish is that government must implement the proposed reforms, such as increasing FDI in insurance and allowing foreign play in pension industry, besides clearing the decks for introduction of GST."



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