Markets to get a green start ahead of the big event

The Indian markets continued their plunge, losing another half a percent ahead of the budget in last session. Traders were unable to get convinced with Economic Survey saying that the economy can look forward to better growth prospects in 2014-15 and beyond, even as poor monsoon and disturbed external environment remain a cause for concern. The Survey further said that the priority of the new government should be to revive business sentiments that could be at the heart of restarting the investment cycle. Today, is the big day of Union Budget with Prime Minister Narendra Modi facing the first major test of his reform credentials. Finance Minister Arun Jaitley’s promises of bold budget decisions and broadsides against the “mindless populism” of his predecessors have already been appreciated by the investors community. So today, the start is likely to be in green, as most of the regional counterparts too are showing positive trend. However, there will be cautiousness too as the traders will be eyeing the major announcements in the budget. Expectations are already running high with respect to the announcement pro-growth reforms from the Finance Minister that will put India back on high growth trajectory. Marketmen will also be eyeing the vision for a sustainable reduction in the fiscal deficit through a lower food and fertilizer subsidies and broadening tax base. Salary class will be eyeing the restructuring of tax slabs, though major reform is unlikely in view of the government’s tight liquidity condition, however some exemption can be expected under 80C. Revenue generation from divestments, the other source of non tax revenue will be eyed with PSU stocks coming to action. The auto stocks can see some upmove after industry body SIAM reported that car sales registered double-digit growth in June after 10 months of subdued sales. 

The US markets made a comeback after a sharp fall and ended mostly higher in last session, reacting positively to earnings news from Alcoa and the minutes of the latest Federal Reserve meeting, which confirmed the Fed’s plan to completely unwind its asset purchase by October as long the economy continues to pick up. The Asian markets have made a mixed start as the Chinese exports missed estimates, while the Japanese yen has strengthened against dollar, weighing on the sentiments.

Back home, extending their last session’s southward journey, Indian equity benchmarks ended Wednesday’s trade in red with cut of half a percent as investors remained on sidelines ahead of the Union Budget to be presented by the Finance Minister in tomorrow. Moreover, the Economic Survey failed to bring any cheer for the market participants, as Finance Minister Arun Jaitley said that country’s fiscal situation was worse than it appeared and hence called for bold steps to contain fiscal deficit, including shoring up public finances and reducing inflation. Sentiments also got hurt after the government in the economic survey estimated the FY15 GDP growth at 5.4-5.9%, adding that it is likely to be on the lower side of the projection. The survey also indicated that inflation limits the scope for RBI to cut rates. Sentiments also remained down-beat after industry body FICCI lowered Indian GDP growth forecast to 5.3% for the current fiscal, as compared to 5.5% growth projected earlier. Global cues too remained sluggish with European markets trading in the red in early deals, while Asian markets shut shop in the red. Back home, railway-related stocks continued to remain under pressure for the second straight day, falling by over 30% in two days on the BSE, following Railway Minister Sadananda Gowda’s maiden Budget. Additionally, selling in fertilizers stocks too dampened the sentiments with the government saying that there was no proposal to increase urea prices and subsidy to farmers will continue. On the flip side, public sector oil marketing companies (OMCs) viz. BPCL, HPCL and IOC edged higher after Brent crude fell below $109 a barrel as Libya restarted an oilfield. Moreover, FMCG shares gained with the survey saying that social sector schemes such as MNREGA, NRHM, SSA, need a complete revamp. Finally, the BSE Sensex dropped 137.30 points or 0.54%, to 25444.81, while the CNX Nifty declined by 38.20 points or 0.50%, to 7,585.00.