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BW Businessworld

Bloom In June

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After abstaining for 18 months from the Indian equity market, 45-year-old Rajesh Boghani re-entered the market three months ago. A veteran of 20 years, Boghani had quit investing in equities in 2010 when he stopped making money. Thereafter, he started his own hardware store to make a living. But Boghani's love for the market pulled him back into trading. "It seems the worst is over and today there is money to be made in the market," says Boghani whose portfolio of Rs 3 lakh is already up 10 per cent since April 2012.

Boghani's may be an isolated case, but the volumes show a renewed interest in the market. The average turnover on the BSE in June was up by 11.5 per cent to Rs 2,110 crore from Rs 1,894 crore in May. In fact, June has been good for equities worldwide; the MSCI World Index and the MSCI Emerging Market Index gained 5 per cent and 3.5 per cent, respectively. In May, the World Index had lost 9 per cent, while the Emerging Market Index plunged 12 per cent.











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"The market has given a thumbs-up to the new finance minister (Manmohan Singh). The market is expecting a revival of the animal spirit in the economy and a reversal of the pessimism in the investment climate," says Rajan Shah, CIO at Angel Broking. He feels the mood in the market has changed on the expectation that after the presidential election, the government will be aggressive on reforms. He also thinks the government will open up foreign direct investment (FDI) in aviation, retail and insurance sectors. "If this happens, the Sensex will go beyond 19000," says Shah. He quickly adds that if no economic reforms happen within one month of the presidential election, the market will fizzle out.











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In June, the Nifty gained 7.2 per cent to beat the BW Expert and the BW Dartboard indices, which were at 6.3 per cent and 5.3 per cent, respectively. In fact, the gain in June saw the Nifty outperform the BW Expert and the BW Dartboard indices in the six months until June. The Nifty gained more than 14 per cent, compared to a 13 per cent gain in the BW Expert Index and 10 per cent rise in the BW Dartboard Index.

On the BW Expert Index, 20 of the 28 stocks gained in June with Larsen & Toubro up over 19 per cent. Others that made a significant contribution to the rise of the index were Jain Irrigation (up 16.14 per cent), ICICI Bank (up 14.70 per cent), ITC (12.46 per cent) and HDFC Bank (up 11.37 per cent). The eight stocks that lost witnessed profit-booking after a sharp rise in the previous couple of months.

Going forward, a softer monetary policy in the West augurs well for markets such as India, but concerns over a monsoon deficit and its impact on inflation will continue to put pressure. Meanwhile, in the tug of war between risk on and risk-off, June saw risk appetite in favour of equities.

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(This story was published in Businessworld Issue Dated 16-07-2012)