Government's actions remain key trigger for the golden era of Indian equities!

In 2014 market rose 30% mainly on account of strong "hope" emerged on account of political stability. The upward journey continued in 2015 and the Sensex rose further 9% to hit a lifetime high of 30,025 on March 4, 2015. However, since then the markets have completely erased this 9% gain and the Sensex returned almost to 2014-end closing level last Friday. Actually this 9% fall in the broader indices doesn't reflect the real pain in the midcap stocks, many of which crashed in this month itself as high as 25% to 30%!

The markets were worried about the reversal of interest rate cycle in the US. During the complete phase out of Quantitative Easing in the US, the domestic markets actually started firming up significantly. Similarly in the case of interest rate hikes in the US, the domestic market is expected to discount it without much pain. The US is also equally worried about its adverse impact on the rest of the economies and hence, the rate hike is expected to be executed in a phased manner in small doses over a year or so.

The government has made far-reaching commitments on economic front thus far. There are about 80 PSUs, which make a combined losses of Rs 28,000 crore per annum. The government has announced a bold measure of shutting down 5 to 7 loss-making PSUs to start with.

The government has approved the policy framework for mixing imported gas with the domestic gas to activate 14,000 mw power projects shut for want of fuel. This would enable over Rs 60,000 crore of investments already made to become performing assets, apart from enhancing the power output significantly.

It plans to increase the capex of public sector enterprises by 30% in the current year and also fund up to Rs 1,000 crore worth on infrastructure in each of 100 cities selected for the "smart city" project in the next 10 years.

The government has provided environmental clearances to 190 projects involving capital outlay of over Rs 6 lakh crore and also plans to accelerate investments in the steel sector to the tune of over Rs 1.40 lakh crore. It aims also to reduce the dependence on import of coal and hence, it has proposed to the domestic production of coal to 1 billion tonne within 4 years. Most of these measures, along with proposed implementation of GST, are path breaking ones. Any successful delivery of these initiatives would lead to a substantial recovery of the industrial economy and the same would result in the Golden era for the Indian equities over the next 2 to 3 years.