Markets to get a cautious start; Infosys numbers to give direction

The Indian markets felt let down by the maiden Union Budget of Finance Minister Arun Jaitley and despite an intraday recovery snapped the last session in red. The major disappointment came with no repeal of the tax provisions relating to tax on indirect transfer of capital assets located in India with retrospective effect. There were lots of announcements made but the budget lacked the clarity how the government will manage to arrange resources for them. However, the budget has got thumbs up from industry players who have said that Budget 2014-15 sets the tone for attaining higher growth trajectory, job creation and attracting investments for an economy grappling with multiple challenges. Today, the start is likely to be soft-to-cautious and now traders will be eyeing the official start of the first quarter earnings season with Infosys announcing its numbers, there is expectation of modest improvement in revenue, while the operating margins is likely to be under pressure on weakening rupee and wage hikes. Chief executive SD Shibulal too had said in the fourth quarter that Q1 would be a little soft on account of seasonality. Meanwhile, the Reserve Bank of India Governor Raghuram Rajan has said that the central bank was “determined” to make sure consumer inflation eases down along a “glide path.” Today, there will be lots of scrip specific actions based on the budget announcements, especially infra and realty stocks, which have got a major boost in the budget.

The US markets despite late hour recovery ended lower in last session, the weakness in the markets was on renewed concerns about the financial situation in Europe. Concerns about the prospect of the Federal Reserve raising interest rate sooner than anticipated also weighed on the markets. The Asian markets have made a mixed start with some of the indices heading for first weekly loss since May 9. Japanese market was once again in red as the yen maintained gains against dollar.

Back home, extending their southward journey for the third day in a row, Indian equity benchmarks ended the session in the red with frontline gauges ending below their crucial 25,400 (Sensex) and 7,600 (Nifty) levels as investors opted to book profit at higher levels even as the Finance Minister Arun Jaitley in his maiden budget focussed on stimulating economic growth. Earlier, markets made a cautious start and entered into red terrain ahead of budget, but showed strong recovery in the second half after Finance Minister fired on all cylinders to bolster growth by reviving the manufacturing and the infrastructure sector. In last leg of trade, markets pared entire gains amid negative opening in European markets. Meanwhile, Finance Minister focussed on reviving structural problems of the ailing economy. FM added that fiscal prudence will lead to fiscal consolidation and aimed at a sustained growth of 7-8 percent in next three-four years. The fiscal deficit for the FY15 was kept at 4.1% of GDP and 3.6% for the next financial year, further lower at 3% in FY17. Nevertheless, lack of proper-roadmap on retrospective taxation and hope of workable solution for GST issue this year, turned out to be bit of worry for investors. On the personal taxation front, the personal income tax has been hiked to Rs 2.5 lakh from Rs 2 lakh, while for senior citizens the tax limit has been hiked to Rs 3 lakh from Rs 2.5 lakh. The Budget has also proposed hike in investment under 80C to Rs 1.5 lakh from Rs 1 lakh and exemption on self occupied property to Rs 2 lakh from Rs 1.8 lakh earlier. The PPF limit has also been hiked to Rs 1.5 lakh from Rs 1 lakh earlier. On the global front, European markets made a sluggish start, though Asian markets ended mostly in the green on Thursday. Back home, shares of real estate companies ended higher after the Finance Minister Arun Jaitley proposed to increase interest cap limit to Rs 2 lakh from Rs 1.5 lakh on self-occupied houses and the proposal to set up real estate investment trusts. Meanwhile, Wind turbine maker gained after the budget proposed to cut customs duty on some wind power generation equipment to 5%, while power companies rose after the budget proposed a 10-year tax holiday for such companies that start operations before FY2017. Additionally, shares of defence companies and financial services companies, with interests in insurance, rose on Thursday after Jaitley raised the cap for foreign direct investment (FDI) in these sectors to 49%.Finally, the BSE Sensex lost 72.06 points or 0.28%, to 25372.75, while the CNX Nifty declined by 17.25 points or 0.23%, to 7,567.75.