Markets to remain cautious ahead of the Economic Survey

The Indian markets suffered a bloodbath in the last session when the rail budget disappointment coupled with F&O February series expiry took the major averages down by around a percent. Today, the start is likely to remain cautious and traders will now be eyeing the Economic Survey to be presented in the parliament later in the day. The survey reviews the developments in the economy over the previous 12 months and and highlights the policy initiatives of the government and the prospects of the economy in the short to medium term, so it will be giving an idea of what the government may come up with, in the budget. Traders will be getting some support with Standard and Poor’s (S&P) latest releses who not only has raised the GDP growth forecast but also said that Indian economy is a “bright spot” in Asia. Today there will be some buzz in the telecom stocks, as the Supreme Court while refusing to stay spectrum auction in all 17 circles has told the Union government not to finalize the allotment of spectrum even if the successful bidder paid up the bid amount. There will be some buzz in the PSU banks, as the government has approved new norms for the selection of managing directors and chief executive officers at five public sector banks. Rail stocks will remain in action along with cement, steel and urea stocks who will be suffering due to freight hike announced in the rail budget.

The US markets continued their consolidation mood and ended mostly lower in last session. The trade remained lackluster and major averaged fluctuated over the course of the trading day. There were some weak economic data that too weighed on the sentiments, initial jobless claims jumped, while the consumer prices fell by slightly more than expected. The Asian markets have made a mixed start, with some of the indices trading in red, while some poised for their biggest monthly advance since September 2013.

Back home, Indian markets went into tailspin on Thursday as the Rail Budget failed to live up to the high expectations. Suresh Prabhu, while presenting his maiden rail budget kept the passengers fares unchanged but increased the freight charges for various commodities, which led to sharp selling in the markets. The railway budget was basically a forward looking statement with no announcement of any immediate new rails, extension or addition. There was some major announcement in the rail Budget like, Rs 8.5 lakh crore investment over next five years, provision of Rs 120 crore for lifts, escalators at major stations, Rs 96182 crores for capacity expansion and keeping the Operating ratio for FY16 at 88.5% against 91.8% for FY15. There was some additional pressure in the market with Global rating agency Moody's stating that fiscal policies and structural reforms will determine India's sovereign credit profile and not recent revisions to the economic growth data. The global cues were mostly positive but the domestic markets remained embroiled in their own affairs, unable to get any support. The Asian markets made mostly a higher closing, while the European stocks too edged higher to fresh seven-year highs in early deals. Back home, apart from the F&O series expiry there was disappointments of the Rail budget that led the markets into dumps. There was across the board selling pressure that took the major indices below their nearest support levels and the major averages snapped the series lower by over 3 percent. The markets looked in somber mood from the very beginning and lacked courage to move higher ahead of the Rail budget and expiry of the series. Trade despite in negative territory remained steady but once the rail budget was announced, markets started selling in a knee-jerk reaction. Even, the positive statement of the Standard & Poor's (S&P), terming India as the “bright spot” in Asia Pacific, failed to encourage the market mood. S&P sharply revised upwards country's GDP forecast to 7.9 per cent next fiscal and even higher 8.2 per cent in the year after. The major rail stocks made mostly a lower close on the BSE. Rail budget not only impacted the rail stocks but also the cement, urea and steel stocks after the announcement of hike in freight rates. Freight rates have been hiked by 0.8% for Iron & Steel, 6.3% for coal, 10% for urea and 2.7% for cement. Finally, the BSE Sensex plunged by 261.34 points or 0.90% to 28,746.65, while the CNX Nifty witnessed cut of 83.40 points or 0.95% to 8,683.85.