More rallies in the offing?

Last week the BSE Sensex gained 101 points to end at 5,218, largely on the easing of oil prices. One other reason may, however, be the passing of the Finance Bill which contains a voluntary disclosure like provision relating to long term capital gains, to be taxed at 10 per cent.
The Indian mind borders on genius when discovering ways to take advantage of loopholes, and the chance to launder unaccounted money at a low rate of 10 per cent is too good to miss.This should see flow of funds into the market, further driving the rally, especially if it crosses a barrier of 5,260 on the Sensex. Of course, there will also be genuine investor interest, as alternative avenues to deploy funds are not present. Bank deposits fetch low interest, money market mutual funds are subject to downside risk if interest rates rise, as they are doing and property attracts unjustifiably high transaction costs (stamp duties) levied to fill empty state coffers.
Corporate performance in the first quarter up to June has also been excellent. However, with interest rates hardening (which could affect demand for consumer durables) and inflation rising, the performance in Q2 may not match it.
Is the government doing enough to make Indian companies globally competitive?
One thing it hasn’t been able to tackle is labour reforms, thanks to political compulsions of partnering the Left.
In fact, Montek Ahluwalia, chairman of Planning Commission, says labour reforms are not necessary to achieve an 8 per cent GDP growth.
This is an ingenuously beguiling statement the economy would, on its own steam, achieve at least 6 per cent this year, and more depending on end season rains.
It’s like saying that a rudder isn’t needed for a boat about to go over a waterfall. Sure, the momentum will take it down but the rudder will be needed thereafter.