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Manik Kumar Malakar, Hindustan Times
Mumbai, June 28, 2013
India’s stock markets have been behaving erratically in the last few days, with the benchmark Bombay Stock Exchange Sensex adding 519.9 points to close at 19,395.8 points on Friday. The Sensex has gained as much as 850 points or 3% over the last two days. A global market rally, as well as good news on the current account deficit at home, have contributed to the recovery. But does this mean that the worst is behind us? Are we entering a bull phase?

Not so, caution experts.

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“We don't think so, there are still challenges that the Indian economy will face going forward,” said Sonam Udasi, senior V-P and head research, IDBI Capital Markets.

The spectre of the CAD and the massive oil import bill continue to hang over the economy, with brent crude rising to $103 a barrel on Friday.

Moreover, the current account deficit, which fell to 3.6% of GDP for the January-March quarter of 2012-13, is expected to rise further going forward, thanks mainly to gold imports in the April-May period, said Sujan Hajra and Gautam Singh of Anand Rathi.

“We have to give the FIIs (foreign institutional buyers) something extra which is not there in India. Hence the worst may not be over,” Udasi said.

Economic reforms can be the savior, said Dipen Shah at Kotak Securities. “The markets will probably go up more sustainably if the government acts on the reforms front,” he said, adding that the government must focus on the core sector. Others feel that the worst may be behind us, at least in the short term.

“I am positive on the markets but the upside (for a market rally) is capped at 6,000-6,100,” said Alex Mathews at Geojit BNP Paribas. The 50-scrip Nifty gained 2.8% or 160 points to close at 5,842.20 points on Friday. “There would be a limit as how much it can gain from those levels,” said Mathews. “From that level there would be stock specific action, rather than a broad based rally.”