Changing stock waves

— The US-based research firm, Elliot Wave International in its Asia-Pacific financial forecast report published on April 9, 2009 has termed Indian stock market as a potential “baby bull” as it thinks the sensex may-continue to advance over next 15 years and is likely to retain its all-time high-level of 2100 index during the period. Along with India, two other countries viz, Taiwan and New Zealand are also termed likewise by the report at a time when developed world’s stock markets including those of Japan, Singapore, Hong Kong, China and Australia are passing through a bearish phase. It may be noted here that the Indian stock market BSE’s sensitive index had touched the all-time high of 21,206.77 on January 10, 2008 and since then, it continued to plunge even below 8000 in the early first week of April 2009, after which a turn around is seen to have registered a continuous gain for the sixth day to 10,803.86 on April 9, 2009. Investors who made a beeline for gold as the safect bet during the crisis period have now started liquidating their yellow metal to switch back over to stock market equities. Since worries over the global economic outlook subsides with rising optimism of speedy recovery, the stock market all over the world has witnessed a change for the better with the range of gains between 1 per cent and 22 per cent.

The turn around in equity markets was mainly caused by two-factors. Firstly, the two giant financial organisations, the Citigroup and the JP Morgan’s announcement of registering profit for two consecutive months in the first week of March brought about a confidence-building footage in the mind of investors. Secondly, the investor sentiment got a considerable boost from the unanimous decision of the recently-held G-20 Summit in London relating to $1.1 trillion of global economic booster package. And, added to this booster dose, the measures to be taken by individual governments would amount to a total fiscal stimulus package of as much as $5 trillion by the end of 2010. One could certainly expect that the stimulus would help global economy return to its growth path much earlier than what time frame was projected for the purpose in the absence of such a financial booster package of G-20 Summit. The long-lasting sustainability of growth in stock market index could be certainly expected now, since confidence of investors in equities is getting restored as funds from US treasury and other sources have started coming back to equity markets while gold holdings are fast getting converted into equity holdings. In addition to the impact of what is happening in bigger world stock markets besides the G-20 Summit, the recent turn around in some segments of the industrial sector and bullish foreign direct investment appear to be the main reasons behind current wave of change in Indian stock market. ASSAM TRIBUNE