The year 2012 started on an extremely bullish note and took almost everybody by surprise. After a splendid January, equity markets continued their climb against the wall of worries right through February. Despite the persistent “Yes”/“No” toggle on the European solution on Greece's bailout and across the- board demotion of Euro-credits by the rating agencies, the markets supported risky assets as the European Central Bank (ECB) and Bank of Japan (BoJ) signaled continued easing and economic data from the US sustained its positive momentum. While the deluge of liquidity has ignited a rally in risk assets, the concerns about solvency crisis and impact of deleveraging process on the real economy and financial markets remain. Economic indicators in India displayed continuation of moderation in the growth momentum: GDP growth for quarter ending December 2011 at 6.1% y-o-y was lower-than-expected. Yet the Sensex rallied and Nifty gained almost 20%. The BSE midcaps and small caps outperformed their large cap counterparts .The liquidity inflows from foreign institutional investors (FIIs) have been a major driver of the current sharp rally in the Indian equity markets. Many measures like PSU disinvestments', increase in Foreign debt limits to attract foreign flows (both equity and debt) were also initiated by the government.
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