Markets to make a soft-to-flat start after a sharp sell-off

The Indian markets went for a sharp selloff in the last session, partially impacted by muted rail budget and partially sensing the global slump. Traders remained unimpressed by the different announcements of the rail budget, as it lacked clarity how the funds will be mobilized for them. Today, the start is likely to be marginally in red and the somberness may extend in the early deals, though some recovery can be expected in latter part of the trade. Today, traders will be eyeing the Economic Survey for 2013-14, a day ahead the Union Budget. The state of the economy will give a hint to what the Union Budget will look like. Meanwhile, global ratings agency Fitch has said that the regular increase in diesel price to align it with market will lead to a 25 percent fall in fuel under-recoveries this fiscal. Public banks are likely to see some action as the government has said that there is no proposal to dilute its ownership in public sector banks (PSBs) below 50 percent. Fertilizers sector stocks too will be buzzing with the government saying that there was no proposal to increase urea prices and subsidy to farmers will continue. 

The US markets suffered sharp cuts in last session on trepidation ahead of the start of earnings season and on concerns about the outlook for monetary policy with speculation that the Federal Reserve will begin raising interest rates sooner than anticipated. The Asian markets have made an all red start tailing the weaknesses in the US markets amid concern valuations are too high. Chinese market too was marginally in red, though consumer-price inflation in the country slowed last month.

Back home, Railway Minister Sadananda Gowda’s maiden Budget failed to impress D-Street, whereby investors queued up for exiting out of risky equities; the budget was seen as lacking big announcements or projects. Indian barometer gauges witnessed blood bath on Tuesday with both the major indices losing around two percentage points and ending below their crucial 7,650 (Nifty) and 25,600 (Sensex) levels. Selling was both brutal and wide-based as none of sectoral indices on BSE were spared. Counter which featured in the list of worst performers included realty, power, public sector undertaking and capital goods. The sell-off was mainly triggered post the Rail Budget announcement. Meanwhile, the first rail budget of the current NDA government tried to strike a balance between the twin conflicting objectives of making profits like a commercial enterprise and yet serving its social obligations. The Ministry in the budget sought cabinet approval for allowing foreign direct investment in the state-owned network, an announcement which despite being on much expected lines, failed to excite markets. In the budget, budgetary plan outlay was proposed to be hiked to the extent of Rs 47,650 crore, compared to Rs 30,200 crore outlined in the interim budget. Meanwhile for FY15, Railways pegged receipts of Rs 1.64 lakh crore (versus Rs 1.39 lakh crore in FY14) and expenditure of Rs 1.49 lakh crore. Though, shares of companies like Kernex Microsystems (India), Titagarh Wagons, Kalindee Rail Nirman (Engineers), Hind Rectifiers and Stone India were near their lower circuits. Selling got intensified as European markets made an awful start, though Asian markets had ended mostly in the green. Back home, sentiments remained dampened on report suggesting Finance Minister Arun Jaitley likely pegging the fiscal deficit target for FY15 at 4.3%, up from the 4.1% stated by his predecessor P Chidambaram, but lower than previous estimate of 4.8%. Meanwhile, Stocks related to capital goods counter edged lower despite EEPC India saying that engineering exports from the country can surpass the $70 billion target in 2014-15 if 3 percent interest subvention is extended for the entire financial year. Finally, the BSE Sensex dropped by 517.97 points or 1.98%, to 25582.11, while the CNX Nifty declined 163.95 points or 2.11%, to 7,623.20.