‘Waiver will trigger short-term market euphoria’

The Nuclear Supplier Group waiver granted to India in Vienna on Saturday, after many a hiccup over the last couple of days, will definitely act as a “mood enhancer” for the Indian bourses when they open on Monday. But the key question is how long this “feel good” effect will last, point out market players.
In the short term of course, the equity market is expected to do a jig and celebrate the end of India’s long-drawn isolation in getting modern technology and material required for its civil nuclear programme. The capital goods and power sectors stand to benefit from this development. But in the long run, factors that are spoiling the party for equity investors, such as rising oil prices, increasing inflation and a tardy US economy, will need to reverse to really have a sustainable positive impact on our market, seems to be the consensus.
Mr C.J. George, Managing Director of Geojit Financial Services, says that in the immediate future, the market “will take the waiver as a positive sign. Actually, for me, this is much more positive news than the passing of the trust vote in Parliament. This will enable India to really move forward in the critical area of energy; so it is clearly a positive for the economy. But the ultimate movers of the market will be dips in inflation and interest rates and a much better global environment. But in the short term, there will be a sense of euphoria in the market.”
Mr T.P. Raman, Managing Director of Sundaram BNP Paribas Asset Management, cannot see this development as a very big mover of the market. “I see it as having a much more positive impact on India’s political future rather than the equity market. By itself, the NSG waiver cannot transform into financial implications for the markets and move them forward.”
In the long term, he feels, the markets will continue to remain volatile; “increasing inflation, rising interest rates and oil prices need to stabilise before we see any real positive impact on the market. But this is definitely a feel good factor in the short term for the market.”
Mr Sandeep Shenoy, Strategist at PINC Research, Mumbai, agrees that the NSG waiver will push up the indices for the short term. “At least this sets aside the overhang of the last few days that the Prime Minister might have to resign and political uncertainty will follow. So in that way it is a positive.”
But realistically speaking, he adds, “for any concrete benefits to come to the capital goods and the power sectors will take a minimum of 18 months. But then, as usual, the market will try to jump the gun and celebrate.”Guide for investors
His advice to investors: Be careful, do not try to trade as you can get trapped into buying at higher prices. Ride out the euphoria and wait for the second quarter results. “These are not going to be so good; maybe even the worst in recent times. I think Q2 results will have a bottoming out effect on the markets, which means the poison will get out of the system. After this it will take a while for the upswing to begin. So investors should move in a calculated manner and not be influenced by 2-3 days of gung-ho sentiment,” adds Mr Shenoy.