In defense of reforms

Attack is the best form of defense – Proverb. UPA II seems to have decided to shed inertia and go on the offensive, notwithstanding a nationwide strike against its reform measures and impending pull-out by Trinamool Congress. The Government is reportedly lining up more reform-oriented moves in the coming days to try and thwart the Opposition’s tirade. The Prime Minister is scheduled to address the nation on Friday to explain the Centre’s rationale behind recent reforms. The Government has already notified FDI in multi-brand Retail and Aviation. The start today will be positive as Asian markets are trading with a positive bias. US markets were largely flat while European indices closed lower. Most of the market participants will take heart from the fact that the Government hasn't yielded to political pressure on reforms. The outlook remains cautiously optimistic amid signs of improvement in governance. Still, any meaningful upside from here on hinges on follow-up steps from the Centre and expeditious execution of reforms announced so far. Some cooling is not ruled out after the recent spike. There is no significant threat to the current uptrend as long as the Nifty holds above 5450 on a closing basis. Today, we expect main indices to trade sideways while the broader indices could out perform. Trend in FII flows: The FIIs were net sellers of Rs 736.7mn in the cash segment on Thursday while the domestic institutional investors (DIIs) were net sellers of Rs 3.3bn, as per the provisional figures released by the NSE. The FIIs were net sellers of Rs 2.4bn in the F&O segment on Thursday, according to the provisional NSE data. The foreign funds were net buyers of Rs 10.9bn in the cash segment on Tuesday while the mutual funds were net sellers of Rs 4.7bn on the same day, according to the SEBI figures. Global Data Watch Today: Foreign investments in Japanese stocks and bonds, Australia Conference Board Australia Leading Index (Jul), UK Public Sector Net Borrowing (Aug), American Petroleum Institute Monthly Report and Federal Reserve's Lockhart speech.