| Senior economist Abheek Barua (left) and senior Crisil official G. Ravi Shankar in Calcutta on Tuesday. Picture by Kishor Roy Chowdhury
Calcutta, Nov. 11: Rating agency Crisil sees the current stock market rally slackening in the second half of this fiscal, particularly in December, when year-end profit-booking by foreign institutional investors leads to corrections.
The rating agency, which is also into information and advisory services, feels that given the current dynamics of the economy and in the broader Asian context, the stock market is beginning to look somewhat expensive.
Moreover, if the US and Eurozone economies begin to show signs of sustained recovery, there could be diversion of portfolio funds away from the Asian markets.
“We expect an upside of roughly 10 per cent in equity indices from current levels in the short run. Volatility is also likely to very high with profit-taking by investors at every up-move,” said R. Ravimohan, managing director and chief executive officer of Crisil.
The stock markets are on a roll since April 2003. PSU stocks led the initial rally on the back of the successful Maruti flotation and then economy-sensitive sectors like banking took over.
Abheek Barua, senior economist at Crisil, said the bull-run was driven by optimism about the economy backed by a dramatic improvement in corporate results in the first two quarters of this fiscal.
“The rally was entirely driven by institutional investors with FIIs taking the lead. FII interest in debt investment waned and was replaced by growing interest in equities. Total FII investment in equities was a massive $3.8 billion,” the officials said.
India was close to the top of the Asian emerging market league with only Thailand and Indonesia faring better. While the overall index for emerging markets went up 39 per cent, Indian markets climbed 43 per cent.
Crisil officials added that the bull-run in Asia and India was not an isolated phenomenon. The drift towards equities has affected markets across the globe.
Crisil is not upbeat about the targeted export growth of 10 per cent in the current fiscal. Exports will be below 10 per cent, the rating agency felt.