The stock indices are showing a strong upturn despite all kinds of economic woes — inflation and inflation expectations are on the higher side, fiscal deficit could slip from its target while the current account deficit may be improving but still remains much above the comfort level of the Reserve Bank of India RBI.

It is unusual for stock markets to rise when the central bank hikes rates. When the markets ended for the week on Friday, to usher Samvatthe Sensex surged to an all time high of 21, It also touched an intra-day high of 21, From its yearly low of 17, This was the day that the rupee also touched its historical low of The rise in stock prices shows that there is lot of liquidity in the system.

Developed economies are pumping lot of money into the system to spur their economic growth, and a huge portion of these funds are reaching the emerging economies pushing up stock prices, including India. This may be due to the Rajan-effect combined with the continuation of the purchase of bonds by the U.

Srinivasan, Director, Brics Securities. Callable bonds give the issuing company the option to, a majority of the investors are still cautious given the forthcoming general elections, Mr.

Hopefully the Government is expected to announce further reforms till the election code of conduct comes into effect. Thankfully, the monsoon has been very good all over India and therefore there will not be any negative surprise on the agricultural front.

This was also confirmed by the RBI Governor Raghuram Rajan, when he announced the second quarter review of monetary policy last Tuesday.

But supply chain still poses difficulties, pushing the food prices high, and the Government is unable to control inflation. In short, the markets depend on further reforms and the benevolence of the US Federal Reserve in continuing its operation of bond buying.

At the is this stock market rally sustainable level, the core sector is not showing any promise, and the non-performing assets NPAs are rising. This has regulated forex traders the stress for the banking system as a whole.

This also reflected in the Sensex in the last four years wherein most of the companies in the core sector have given negative returns. The best performers were all from the non-core sectors. The moot question is that whether this rally is sustainable? There is fear in the market — based on the earlier experiences — that whenever Sensex crossed 21,mark, on both occasions, it fell sharply.

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