When it rains, it pours.

“When it rains, it pours good news on markets”.

The prompt arrival of the monsoon has eliminated one chapter in the investor’s worry book. The market’s monsoon worry got eliminated even before it began. With the monsoon arriving on time, the stage is set for the best year of sowing in Indian history. This is possibly one of the most bullish economic signs since demonetization brought gloom and worry to the investor community.

When sowing is better than ever, a regular progress of the monsoon can lead to a historic high Kharif output. With the government’s support prices, this could lead to one of the best years for the rural economy.The markets seem to have already sensed this and the moves in consumption stocks clearly indicates this influence. The markets will always be hungry for more good news. This brings us to a situation where both good news and bad news are flowing thick and fast. The problems of groups embroiled in defaults are also heading towards a climax. But, the markets have little time for bad news and are simply dumping these groups and moving on. This shows an overwhelming tendency to focus market energies only on good news. The markets then look only for more good news. This is typical bull market behaviour. So, what next? The poor GDP data and the better than expected inflation data could possibly create a positive surprise from the monetary policy committee at the RBI next week. A cut in interest rate is currently not on the market’s agenda. If the RBI obliges the longstanding demand of the Fin Min, we could see the markets break out into a song. GST is set to be implemented from July 1. This sets the stage for more good news and firms will crank up production from July 1.

The narrative on GST will change once it has a formal start. Markets will start viewing the benefits more clearly and companies will offer greater clarity. When good news rains, it can only pour money into markets. Domestic flows seem to be the best indicator of how the markets are seeing the emerging narrative.

“Investing should be fun and challenging, not stressful and worrying.”

– Walter Schloss

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