INSUBCONTINENT EXCLUSIVE:
NSE Nifty 50 Index has more than doubled from a March 2020 low.Traders are betting India's record-breaking stock rally still has legs,
fueled by expectations of continued dovish monetary policy even as inflation fears deepen.The nation's NSE Nifty 50 Index has more than
doubled from a March 2020 low -- one of the best performers in the world over the period and testing new peaks almost every month
It is also among Asia's top gainers this month, beating the regional benchmark by about 4 percentage points.Breaking with other
emerging-market central banks that have either hiked or indicated higher rates, the Reserve Bank of India has held a dovish stance as its
governor believes price gains are transitory
Overseas investors are taking notice, with net inflows amounting to about $7 billion so far this year, the highest among emerging markets in
Asia, according to Bloomberg-compiled data."The RBI has kept its stimulus policy easy and is likely to keep it like that for the months to
come, and that will continue to support the stock market," said Tom Masi and Nuno Fernandes, New York-based portfolio managers at GW-K
Investment Management.Consumer prices rose more than 6% in both May and June, driven by higher food and energy costs
That has dented returns from traditional sources such as bank deposits and sent individual investors to stock trading for juicier gains
Market players expect retail participation to rise further after 14 million new first-time electronic accounts were opened in the fiscal
year through March 2021, according to India's market regulator.Rates Are KeyWhile low interest rates and ample liquidity are the major
factors for increased interest in equities, any reversal in easy policy would impact the market, said Ajay Tyagi, chairman of the Securities
and Exchange Board of India, the market's regulator on Thursday.The RBI has kept interest rates at a record low since May last year and
injected unprecedented liquidity into the banking system.Indeed some equity markets have taken a hit after a hawkish turn by their central
In South Korea, where the Bank of Korea signaled policy normalization this month, stocks declined by more than 1% in July
Equities have also retreated in Russia and Brazil where the central banks have already started raising rates.Rising inflation may force the
RBI to tighten policies although many believe chances are low for such a move in the near future
Growth is still considered a priority by the central bank even as new local Covid-19 cases slow.Companies may have to raise prices to absorb
surging input costs, said Kunal Kundu, an economist with Societe Generale GSC Pvt
"Given this, the RBI may have to bring forward monetary policy normalization."Still, investors are optimistic the RBI will continue to keep
its policy accommodative, a move that will support stocks."The RBI's decision to keep interest rates lower is helping companies reduce
debt and loan-servicing costs," said Chakri Lokapriya, managing director at Mumbai-based TCG Asset Management Co
Lower debt costs "will allow stocks to command a higher multiple."
