InvestorQ : What is your view on the stock markets for 10ths August? Do you see the Bihar situation impacting the stock markets?
shrinidhi Rajan made post

What is your view on the stock markets for 10ths August? Do you see the Bihar situation impacting the stock markets?

diksha shah answered.
2 months ago

On Markets, the Nifty and the Sensex had closed strong with gains of 127 points and 465 points respectively. However, Tuesday was a trading holiday on account of Moharram and trading restarts on Wednesday ahead of the monthly inflation announcement by the US Bureau of Labour Statistics. Indices rallied on Monday on hopes that inflation would taper.

In terms of market structure, the big driver of the rally was M&M, which is attracting a lot of buying interest after showing record bookings with demand far exceeding supply. On Monday, the advance decline ratio or the A/D ratio was also strong at 34:16, showing good breadth. SBI, BPCL and Britannia traded weak on poor results for the June 2022 quarter.

On Monday, the Foreign investors were net buyers in equities worth Rs.1,450 crore as domestic funds and LIC sold stocks worth Rs.141 crore. FPIs have infused $2 billion in August till date. On Tuesday, Dow was down 58 points while NASDAQ was down 151 points ahead of the inflation announcement. Europe was flat while SGX is 19 bps lower in early trades.

The global markets are likely to remain tentative ahead of the US inflation data to be announced on 10th of August. It had touched a 41-year high of 9.1% in the month of June 2022 and some tapering is expected in July due to a series of hawkish moves by the Fed. If the fall is meaningful, the markets are likely to react positively to the price data.

Finally, let me come to your question on impact of the Bihar situation? There were big political developments in Bihar on Tuesday as Nitish Kumar walked out of the NDA and decided to form the government. He has met the RJD chief, Tejaswi Yadav, and will form the government with the support of the RJD and the Congress. That is Nitish Kumar’s fourth about turn in 6 years, but that is not the point. This was expected to happen, so there is not a great element of surprise. Will this impact the markets?

I honestly feel that the impact of the Bihar outcome would be marginal on stock markets. The was always expected to happen and the question was always of when and not whether. However, the larger implications of this move either for the numbers of the NDA at a national level or their reformist credentials is very limited. So, thing should be business as usual for the markets on Wednesday.