Indian markets ended the week at 52-week highs on the back of a 2 per cent plus gain on Friday. It was the best-performing markets globally for the week.

Shares in the beaten down sectors of capital goods, infrastructure, power, etc were the leaders. Stocks in the FMCG, pharma and IT were the underperformers, after their strong run-up in recent weeks.

This outperformance was the result of the fiscal reforms announced last week and also in the current week. The FDI in aviation and multi-brand retail was notified without any delay during this week.

The government also reduced the withholding tax on overseas borrowings and also cleared the Rajiv Gandhi Equity Savings Scheme. We believe this will provide some impetus to the retail participation in the market by increase in participation from first time retail investors into the market.

Concerns about the stability of the UPA government were also largely addressed. With political uncertainty addressed to a large extent markets are now hopeful of further reforms being announced in India.

We are enthused by the reform initiatives announced by the government. These initiatives open the doors for foreign monies to flow in. However, we believe that these would now have to be followed-up by some of the core reforms, which will encourage further investments in the manufacturing segment and hence, attract more money.

The FM has already indicated that, a National Investment Board should be set up, to reduce the time taken to approve large projects. This should help concerns relating the procedural and administrative delays, we believe.

Further progress on issues like power, mining and land acquisition will provide the much-needed fillip to investments, which have been held back till now. The market will take cues from these initiatives to stabilise and move up further.

The rupee has appreciated today on expectation of further equity inflows from FII after the government announced further reforms related to the withholding tax and the Rajiv Gandhi Equity Savings Scheme. We expect the rupee to remain at elevated level if further reforms are announced over the next few weeks.