Nifty’s Singh Song: Street talks 6300 now

On the Street, two days is all it takes to change sentiment 180 degrees.

Thursday’s hard measures taken by the government to hike diesel prices and limit LPG subsidy led to a 443.11 point salute from the Sensex on Friday.

The index closed at a 14-month high of 18464.27, while the Nifty rose 142.30 points to end at 5577.65. The flight was in no small measure helped by the decision of the US Federal Reserve to unleash a third round of quantitative easing.

Foreign investors bought equities worth Rs 2,834 crore as per provisional exchange data.

Then, after close of trade on Friday, came the flurry of announcements by the Cabinet, which cleared the much-awaited foreign direct investment in multi-brand retail, aviation, power exchanges and broadcast services.

VK Sharma, head of private broking and wealth management at HDFC Securities, said the markets have got more than they had expected.

He sees the Nifty rising to 6300 by the year-end.

“These steps will have far reaching implications for economy and markets. For one, it paves the way for the RBI to act on Monday as there has been effort shown by government to address fiscal deficit issues. Also, this staves off probable downgrade of the sovereign in the foreseeable future,” he said.

Manish Sonthalia, vice-president and fund manager at Motilal Oswal Asset Management Company, says the Nifty is likely to test 6100 once 5800 is taken out, which, in turn, would depend on how well the government is able to defend its decisions.

“The government has done its bit and it all depends how well they are able to tackle opposition from Mamata Banerjee and others. If they are successful, we may see markets testing previous highs,” he said.

Even if there’s a partial rollback, the markets are headed higher, experts said.

The change in fuel costs “is a bold move and is good for the equity market as it will help the government cut the fiscal deficit,” Anand Shah, chief investment officer at BNP Paribas Asset Management India, told Bloomberg. A lower fiscal deficit will “eventually bring down interest rates.”

“With 6-7 announcements coming in 2 days, the government has sent out strong signals. Though FDI in aviation may not lead to inflows in the near term, FDI in retail could and investments in related infrastructure such as cold storages and logistics,” Sonthalia said.

Sharma feels the process on the reforms front, along with Federal Reserve chief Ben Bernanke’s blank cheque, will continue to propel markets up.