The ECB started its mission of “doing whatever it takes” with buying the bonds from the struggling countries of Euro zone. The market’s fear of Spain and Italy heading towards a full- bailout similar to that of Greece has been averted for now. The United States has set itself for the next round of bond buying, which is not time bound. Even the Japanese joined them and announced the new stimulus plan. The stimulus plans announced by all the major economies may work in the short term but doesn’t offer a permanent solution to the problem.
In the times of unlimited Quantitative Easing, the markets around the globe are riding on the sentimental wave. With German court backing up the Eurozone’s ESM bailout fund, and Fed deciding to pump in more stimulus money, the markets took the news in a positive way but settled after trading high for few sessions. China’s move to approve more stimulus package could also help their economy temporarily.
Following the rallies in the global markets after the decisions of ECB and Fed, BSE reached the 6 month high and crossed the 18000 mark. BSE wasfurther boosted by the economic reforms announced by the Government. The current markets are driven with the sentiment that more economic reforms are on the way. Though the current scenario seems promising in the short term, the reality that economy has come to a stand still remains a point to ponder over.
In such conditions, Indian equities are expected to be range bound. The major markets have followed the same trend over the last year which even signifies the slow growth rate around the world. Volatility could increase once the euphoria dies down.