Markets to get a cautious start on weak economic data

The Indian markets continued their rally mood in last session riding on the reform hopes after the budget. Today, the start is likely to be in green and Nifty may log fresh record highs after crossing 8950 levels. However, there will be some cautiousness too on weak economic data, as after lower  manufacturing numbers, growth in eight core industries has slowed down to 1.8% in January, its lowest in last 13 months, due to negative expansion in crude oil and natural gas. Also, the global rating agency S&P ruled out a rating upgrade for India within a year while Fitch said the government's fiscal consolidation strategy spelt out in Budget is “less aspiring” than in the past. Meanwhile, Finance Minister Arun Jaitley has said that India’s economy needs to reach an annual growth rate of 9 percent to 10 percent and then sustain that activity “many, many more years than 10 years” in order to improve infrastructure and bring down rampant poverty. Auto sector will be in focus based on their monthly sales numbers, some of the major carmakers have posted single-digit growth in January owing to increase in excise duty.

The US markets rallied in last session, with the tech-heavy Nasdaq closing above 5,000 for the first time in fifteen years. There were mixed set of numbers but traders lapped the positive ones and led the markets higher. Personal income rose in January, while US manufacturing activity growth slipped to its lowest in 13 months. The Asian markets have mostly made a firm start, though some of the major indices are in red ahead of Friday's US jobs report.

Back home, extending their previous session’s jubilation, Indian equity benchmarks ended the volatile day of trade with a gain of around half a percent after the Union Budget tabled by Finance Minister Arun Jaitley reduced corporate tax and announced a timeline to implement the General Sales Tax. Sentiments were also buttressed as FM promised lower-than-expected borrowing despite raising the fiscal deficit target and as Jaitley announced several measures to woo foreign investors, who have been the backbone of the current rally that has seen Indian stocks outperform most emerging markets. FM deferred the dreaded General Anti Avoidance Rule (GAAR) by two years and proposed to extend a concessionary rate of 5% for so-called withholding taxes on debt investments by foreign investors by two years, until July 1, 2017. After a gap-up opening, domestic markets succumbed to profit-booking after the HSBC Manufacturing Purchasing Managers’ Index (PMI), compiled by Markit fell for the second consecutive month, to 51.2 in February from 52.9 in January implying that manufacturing activity expanded at its slowest pace in five months in February on slowdown in new orders dragging overall output. Positive opening in European markets too supported the sentiments. Moreover, China's rate cut and more than expected manufacturing index provided a boost to Asian stocks. Back home, sentiments also remained up-beat on report that foreign portfolio investors (FPIs) bought shares worth a net Rs 614.03 crore on Saturday, as per provisional data. Meanwhile stocks related to infra space edged higher with the announcement of different measures in the budget, there is proposal to set up 5 ultra mega power projects, each of 4000MW and Tax-free bonds for projects in rail road and irrigation. Government has also said to revitalize the PPP model for infra with taking maximum risk. Moreover, stocks related to cement space surged with most of the frontline companies ending at their lifetime high on expectation of demand in the wake of Rs 70,000 crore additional investments in infrastructure proposed in the Budget. Additionally, shares of state-owned oil marketing companies edged higher by 3-5% after they hiked prices of transport fuels such as petrol and diesel by over Rs 3 per litre which came into effect from Saturday midnight. Finally, the BSE Sensex surged by 97.64 points or 0.33% to 29459.14, while the CNX Nifty soared by 54.90 points or 0.62% to 8,956.75.