Markets to get a cautious start; budget impact to be seen on sectors

The Indian markets after witnessing huge round of volatility and once slumping to their fresh 52 weeks low bounced back, though despite recovery ended with cut of over half a percent on the big budget day. Today, the start is likely to remain cautious and traders after analyzing the impact of the budget proposals will be taking selective bets. Meanwhile, Finance Minister Arun Jaitley has said that there are serious challenges as far as agrarian sector is concerned and this Budget is a combination of several things … In addition to priority to agriculture and to rural sector, I am putting in place targeting of subsidies through a legislation which I would introduce immediately. India Inc has lauded the budget proposals to boost rural and infrastructure sectors, saying they will have a multiplier effect on the economy. Though, they expressed dissatisfaction on the corporate taxation front, which was expected to see phased reduction to 25 per cent from 30 per cent. Jaitley also reiterated his commitment to implement General Anti Avoidance Rules (GAAR) from April 1, 2017, that can give some respite to the FIIs about the clarity. The rules are aimed at minimising tax avoidance for investments made by entities based in tax havens. However, there will sectoral impact and apart from the additional cess, Aviation sector will have to face a hike of 6 percent in excise duty on jet fuel. On the same time car companies are likely to feel the heat of an additional percent of cess hike.

The US markets ended lower in last session, with downbeat economic news renewing fears of a US economic slowdown. Pending home sales index slumped 2.5 percent to 106.0 in January, also there was an unexpected contraction in Chicago-area business activity in the month of February. The Asian markets have made a mixed start and some of the indices are in red after a gauge of Chinese manufacturing declined, matching its lowest level of the past seven years that weighed on crude oil and copper. Japanese market too was down on strength in yen.

Back home, it turned out to be a roller-coaster ride for the frontline indices, which declined over two percent in today’s session but finished the day with moderate losses of just over half a percent. After getting a cautious start, Indian benchmark traded below neutral line for most part of morning tread, but sharp selling was witnessed in mid afternoon session as investors took to across the board, spooked by Finance Minister Arun Jaitley’s proposals to reintroduce General anti-avoidance rule (GAAR) from April 2017, allocating Rs 25,000 crore for recapitalization of PSU banks that is much below Street’s estimates and proposal to levy 10% dividend distribution tax in the hands of investors. However, sharp recovery in late afternoon trade managed to take the indices into the positive territory but only for a brief period as fresh bouts of profit booking again brought the indices to lower levels by the end of trade. Eventually the NSE’s 50-share broadly followed index Nifty, took a cut of over half a percent to settle below the crucial 7,000 support level, while Bombay Stock Exchange’s Sensitive Index, Sensex slipped by over a hundred and fifty points and closed above the psychological 23,000 mark. On the global front, Asian market ended mostly in red on Monday after a weekend meeting of the Group of 20 economic policymakers ended with no new coordinated action to spur global growth, European stocks too slipped in early trading. Back home, the broader markets managed to escape heavy losses and settled on a flat note, yet outperformed their larger peers. On the BSE sectoral space, the high beta sectors like – IT and Teck pockets remained among top laggards in the space as they got lacerated by 2.11% and 2% respectively. Finally, the BSE Sensex plunged by 152.30 points or 0.66% to 23002, while the CNX Nifty dropped 42.70 points or 0.61% to 6,987.05.